WORKS  MANAGEMENT  LIBRARY 


EXPERIENCES 
IN  EFFICIENCY 


BY 

BENJ.  A.  FRANKLIN 


NEW  YORK 

THE  ENGINEERING  MAGAZINE  GO. 
1915 


Copyright,  1915 

By  THE  ENGINEERING  MAGAZINE  CO. 


INTRODUCTION 

Mr.  Franklin's  book  is  offered  in  answer  to  a  many- 
voiced  inquiry  for  specific  examples  of  efficiency 
methods.  It  shows  the  employer  or  manager,  strug- 
gling with  problems  of  increasing  cost  of  operation 
and  diminishing  returns,  how  other  men  discovered 
and  used  a  road  to  success  out  of  similar  difficulties. 
It  is  a  concise  record  of  "leading  cases."  The  ma- 
terial is  selected  from  the  author's  wide  and  success- 
ful experience  and  represents  a  diversity  of  .situa- 
tions in  a  variety  of  industries.  In  each  case  the 
story  is  reduced  to  its  simplest  elements,  but  it  still 
shows  clearly  the  character  of  the  problem  attacked 
and  the  nature  of  the  solution  found.  It  tells  what 
was  done,  why  it  was  done,  and  how  it  was  done. 

Most  of  the  chapters  appeared  originally  in  THE 
ENGINEERING  MAGAZINE.  As  here  reprinted  they 
are  revised,  adapted,  and  marshalled  in  sequence  so 
as  to  constitute  a  logical  and  progressive  survey  of 
practice,  following  the  order  in  which  it  demands  the 
manager's  attention.  It  begins  with  the  thing  which 
is  generally  uppermost  in  a  manufacturer's  mind — 
the  handling  of  labor.  Four  chapters  are  given  to 
methods  of  increasing  both  output  and  quality  of 
direct  production ;  the  fifth  extends  the  same  princi- 

Eles  to  the  treatment  of  clerical,  or  "non-productive," 
ibor ;  the  sixth  enlarges  the  same  applied  ideas  so  as 
to  include  the  entire  force.     In  the  seventh  chapter 

ill 


v  INTRODUCTION 

we  pass  from  the  individuals  to  the  organization; 
in  the  eighth  we  attack  a  reduction  of  factory  ex- 
penses; in  the  ninth  we  develop  an  efficiency  cost 
system,  and  in  the  last  chapter  we  find  all  the  preced- 
ing measures  connected  to  and  based  upon  the  fun- 
damental necessity  of  "efficiency  will"  as  a  driving 
force  in  the  establishment  of  efficient  practice. 

CHABLES  BUXTON  GOING 


PEEFACE 

The  methods  employed  even  in  the  most  efficient 
plants  are,  in  the  main,  after  all  but  the  methods, 
possibly  somewhat  modified,  tried  and  found  effective 
here  and  there  in  different  places  in  the  manufactur- 
ing and  business  world,  and  passed  along  consciously 
or  unconsciously. 

The  successful  executive,  after  all,  is  essentially 
or  even  generally  not  an  originator  of  new  ideas,  so 
much  as  he  is  an  assimilator  and  an  adapter  inspired 
by  what  he  sees,  hears  and  reads. 

What  is  successful  in  one  plant,  with  proper 
change,  adaptation,  and  modification  will  be  success- 
ful in  another,  if  the  basic  principle  of  its  operation 
is  understood. 

These  three  principles  have  emboldened  the  author 
to  recite  the  few  experiences  herein  enclosed,  with 
the  hope  that  here  and  there  they  may  offer  that  in- 
spiration by  which  so  many  efficiencies  find  their  be- 
ginning. 

BENJ.  A.  FRANKLIN 


CONTENTS 

PAQB 

CHAPTER  I.    A  SUCCESS  SECURED  BY  STUDY  OF  WORK- 
MEN'S TENDENCIES. 

Why  Labor  is  most  Frequently  the  First  Point 
of  Efficiency  Attack — A  Case  where  Savings  Ex- 
ceeding $30,000  a  year  were  Effected— The  Scene 
Laid  in  a  Large  Leather  Factory — Conditions 
Surrounding  the  Work — How  Inefficiency  was 
Manifested — The  Workmen's  Influence  on  Out- 
put— An  Incentive  to  Increased  Production  De- 
termined Upon — Dangers  of  Loss  of  Quality  by 
Increasing  Output — Increased  Inspection  must 
Accompany  Increased  Piece  Kates — The  Prelimi- 
nary Studies — The  Rates  Determined  Upon — The 
New  Methods  Outlined— The  Results  Described.  1 

CHAPTER  II.    A  PROBLEM  OF  QUALITY  OF  WORKMAN- 
SHIP. 

Quality  Requirements  Always  Present — Quality 
does  not  Depend  upon  Day  Work  or  Piece  Work, 
Slow  Work  or  Rapid  Work — Quality  is  a  Mat- 
ter of  Systematic  Insistence — Three  Weaknesses 
of  Human  Nature  which  Tend  to  Lowering  of 
Quality — Description  of  the  Plant  in  which  Qual- 
ity of  Output  was  to  Be  Improved — Character  of 
Production,  Arrangement  of  Departments,  Man- 
ufacturing Practice — Abuses  which  Existed — How 
the  Delays  and  Losses  were  Investigated — What 
the  Causes  were  Found  to  Be — What  Methods 
were  Installed — Inspection  and  Report  System 
Adopted — Organization  of  the  Inspection  Depart- 
ment— Cards  and  Forms  Used — How  the  Better- 
ments were  Introduced — What  Results  were  Se- 
cured    14 

vii 


Vlll  CONTENTS 

PAGH 

CHAPTEB    III.    WASTE    SAVING    THROUGH    QUALITY 
PIECE  WORK. 

Where  Quality  is  Insisted  on  the  Men  will 
Work  to  it— A  Plan  by  Which  Quality  Require- 
ments are  Automatically  Secured — A  Mill  where 
Waste  was  Considerable  under  Day- Work  Plan — 
How  Quality  was  Raised  by  a  Piece-Work  Sys- 
tem— How  Rates  were  Fixed,  Limits  of  Waste 
Determined,  and  a  Bonus  for  Savings  Introduced 
— The  Results — The  Three  Requirements  for  a 
Successful  Quality  Piece-Work  System 3? 

CHAPTER  IV.    GANG  PIECE  WORK. 

Prevalence  of  the  Piece-Work  Method — Its  Re- 
lations to  Efficiency  of  Operation — How  Piece 
Work  may  be  made  Efficient — What  Gang  Piece 
Work  Means — Its  Differences  from  the  Contract 
System — An  Example  Taken  from  an  Envelope 
Factory — How  Gang  Piece  Work  Solved  the 
Problem,  with  its  Advantages  to  both  Factory 
and  Men — An  Example  from  a  Plating  Room — 
How  Gang  Piece  Work  Secured  Economies 
where  Individual  Piece  Rates  were  Impossible — 
An  Example  from  an  Assembling  Department — 
How  Gang  Piece  Work  Stimulates  Co-operation 
and  Works  toward  Greater  Total  Efficiency 42 

CHAPTER  V.    THE  PROBLEM  OF  CLERICAL  LABOR. 

Executives  Fear  Efficiency  Methods  because 
they  Apparently  Increase  Non-Productive  Ex- 
pense— How  a  Factory  Employing  600  People 
Minimized  Expense  in  its  Cost  Department — In- 
creased Statistical  Information  was  Needed  with- 
out Increase  in  Number  of  Cost  Clerks,  as  the 
First  Step  was  to  Be  Placing  the  Statistical  De- 
partment on  the  Time-Note  System — What  the 
Time  Notes  were — How  they  were  Received  by 
the  Clerks — How  they  were  Studied  by  the  Head 
of  the  Department — How  they  Led  to  Better  Dis- 
tribution of  Work  and  Use  of  Time — How  Indi- 
vidual Time  Schedules  were  Made  up — How  they 
Began  to  Stimulate  Individual  Efficiency — The 
Lessons  Applied  to  General  Problem  of  Clerical 
Labor — How  Clerical  Labor  can  be  Made  Actu- 
ally to  Pay  under  this  System 53 


CONTENTS  ix 

PAGH 

CHAPTER  VI.    INCLUDING  THE  WHOLE  FORCE  IN  LABOR 
REWARD. 

Labor  Yields  Most  Readily  to  Intelligent  Ef- 
fort— Increased  Production  Reduces  the  Ratio  of 
Expense  Burden — Efficiency  of  Labor  may  be  In- 
creased in  Three  Principal  Ways:  Substituting 
Machinery,  Re-modeling  the  Executive  Organiza- 
tion, or  Rewarding  Labor  According  to  Results — 
The  Three  Plans  Compared— All  Fall  Short  be- 
cause they  Reach  Only  the  Direct  Producer — 
A  Story  of  a  Plant  where  even  the  Office  Force 
were  Paid  on  the  Incentive  Basis — The  Situation 
Described — What  the  Weaknesses  Proved  to  be 
— What  Measures  of  Importance  were  Deter- 
mined upon — How  the  "Squeeze  Point"  was  Lo- 
cated— How  Standard  Rates  were  Fixed — How 
the  Gang  Piece  Work  was  Applied  to  Store- 
keepers, Labelers,  and  Shippers — How  Expense 
Standards  were  Determined — How  the  Bonus 
Rates  were  Fixed— The  Gains  at  the  End  of 
Six  Months  and  of  a  Year 66 

CHAPTER  VII.     PRODUCTION  LARGELY  INCREASED  BY 
SIMPLE  REORGANIZATION. 

An  Example  from  a  Rubber-Goods  Manufac- 
turing Plant — The  Situation  Described— Difficult 
Conditions  Imposed  by  Seasonal  Demand,  Trade 
Customs,  and  Character  of  Goods — How  These 
Affected  Unfavorably  the  Efficiency  of  the  De- 
partment— How  Reforms  were  Inaugurated — 
How  a  Simple  Planning  Department  was  Or- 
ganized to  Relieve  the  Foreman — How  the  Work 
of  the  Production  Clerk  was  Laid  Out — How 
Working  Schedules  were  Compiled — How  the 
Work  of  the  Various  Departments  was  Co-ordi- 
nated— How  the  Central  Production  Department 
was  Formed — The  Favorable  Effects  upon  Out- 
put, Wages,  Customers,  and  Volume  of  Business.  79 

CHAPTER  VIII.    REDUCING  THE  FACTORY  EXPENSE. 

The  Logic  of  Efficiency  and  the  Reluctance  of 
the  Executive — The  Manager's  Fear  of  an  In- 
creased Expense  Account — How  Total  Expense 
and  Ratio  of  Expense  to  Unit  Production  Costs 
were  Reduced  with  Increased  Efficiency — The 


X  CONTENTS 

PAGE 

Example  of  a  Light  Manufacturing  Plant  Em- 
ploying 1200  Hands— The  Expense  Conditions 
in  this  Establishment — Its  Old-Fashioned  Form 
of  Organization — How  this  was  Left  Unimpaired 
and  a  Cost  Department,  Inspection  Department, 
and  Production-Planning  Department  were  Add- 
ed— How  Expense  was  Analyzed — How  the  Ex- 
pense Figures  were  Interpreted — How  Changes 
were 'Decided  upon  Item  by  Item — How  Econ- 
omy was  Applied  to  the  Use  of  General  Supplies 
— Methods  Employed  in  Introducing  a  General 
Store-Room — How  Repair  Expenditures  were  Re- 
duced— How  Non-Productive  Labor  was  Cut 
Down — How  Tool  Expenditure  was  Lowered — 
What  Results  were  Secured  in  Six  Months — 
What  General  Advantages,  Both  Financial  and 
Moral,  were  Secured 94 

CHAPTEB  IX.    BUILDING  A  COST  SYSTEM. 

Knowledge  of  Costs  now  Considered  to  Be 
Necessary — The  Cost  Problem  as  it  Appeared 
in  a  Machine-Building  Plant  Comprising  Three 
Departments  and  Employing  125  Men — What 
Controlling  Figures  the  Executive  Wanted — 
What  the  Human  Equipment  was:  a  Bookkeeper 
and  an  Assistant — The  Detailed  Costs  were  Di- 
vided as  Usual  into  Material,  Labor,  and  Ex- 
pense— Expense  Figures  were  Attacked  First — 
How  they  were  Analyzed — How  the  Expense  Fig- 
ures Startled  the  Executive — Objections  Encoun- 
tered among  the  Workmen — How  their  Opposi- 
tion was  Overcome — How  Material  Expense  was 
Attacked — Description  of  a  Simple  Store-Room 
System — Description  of  the  Material  Journal — 
How  the  Cost  Figures  were  Utilized — How  Analy- 
sis of  Weekly  and  Monthly  Statements  Led  to 
Economies — The  Favorable  Results  at  the  End  of 
Eight  Months 121 

CHAPTER  X.    THE  NECESSITY  OF  EFFICIENCY  WILL. 

Many  Executives  are  Still  Suspicious  of  the 
Efficiency  Engineer — His  True  Relation  to  his 
Clients — Every  Business  has  Two  General  Divi- 
sions, one  is  Special  to  the  Business,  the  other  is 
General  to  all  Business.  It  is  in  this  Second  Di- 


CONTENTS  XI 

PAGE 

vision  that  the  Efficiency  Engineer  should  Exer- 
cise his  Functions — The  Story  of  Three  Metal- 
Working  Establishments  in  which  an  Efficiency 
Engineer  was  Successful — First,  a  Concern  with 
Weak  Executive  Organization — Second,  a  Case  of 
Strong  and  Energetic  Dual  Control — Third,  a 
Case  of  Shrewd  but  Superannuated  Proprietor- 
ship with  Divided  Authority  in  Second  Command 
— How  "Efficiency  Will"  was  Inspired  in  all 
Three  Cases  with  Happy  Results  in  Every  In- 
stance   * 148 


EXPERIENCES  IN  EFFICIENCY 


CHAPTER  I 

A   SUCCESS   SECUKED   BY   STUDY   OF 
WOKKMEN'S    TENDENCIES 

TN  American  business  life,  especially  in  the 
•*•  manufacturing  division,  there  has  arisen 
almost  a  hue-and-cry  for  methods  of  higher 
efficiency.  This  demand  is  in  no  sense  tempo- 
rary, nor  is  it  illogical.  It  is  the  reasonable 
outcome  of  three  well-known  conditions. 

It  is,  first,  the  natural  corollary  of  the 
forward  movement  of  the  last  few  decades 
in  science  and  invention,  of  which  an  enor- 
mous increase  in  efficiency  by  machinery  has 
been  a  feature. 

Secondly,  the  high  cost  of  living  has  been 
persistently  demanding  an  antidote,  and 
greater  efficiency  apparently  offers  some 
hope  of  remedy. 

Thirdly,  the  constant  demand  by  labor  for 
increase  of  wages,  meets,  on  the  part  of 

1 


2  EXPERIENCES    IN    EFFICIENCY 

capital,  an  offset  in  a  demand  for  higher 
efficiency;  and  there  are  those  who  hope  to 
see,  finally  devised  and  developed  into  uni- 
versal practice,  some  method  or  methods  of 
efficiency  and  reward  which  will  go  far 
towards  solving  the  problem  of  proper  jus- 
tice and  balance  between  these  two  warring 
elements. 

The  methods  of  efficiency  most  often  and 
most  spectacularly  attack  labor.  This  is  so 
because  this  element  possesses  the  most  elas- 
ticity in  its  efforts,  can  be  quickened  into 
more  efficient  action  with  the  least  expendi- 
ture in  surroundings,  and  of  course  is  the 
most  oft-recurring  element  in  production 
and  in  the  cost  of  manufacture. 

The  results  obtained  in  this  attack  are 
sometimes  almost  magical  in  effect.  The 
magician  sets  out  his  stock  in  trade,  rolls  up 
his  sleeves,  and  explains  how  ordinary  and 
usual  are  all  the  conditions.  A  few  graceful 
motions,  and  lo!  the  unexpected  and  appar- 
ently impossible  has  taken  place,  and  we 
wonder  and  admire  the  result.  But  back  of 
every  wonder-production  lies  a  simple  expla- 
nation, a  definite  plan,  the  skill  of  practice 
and  experience,  and  a  knowledge  of  human 
limitations  and  tendencies. 


PROFITING   BY    WORKMEN  S    TENDENCIES  3 

So,  exactly,  is  the  case  with  some  examples 
of  efficiency  work,  although  often  results, 
which  in  the  end  are  remarkable  in  compari- 
son with  the  conditions  at  the  start,  may 
take  some  time — six  months  or  a  year  or 
even  longer — in  arriving  at  their  fullest  val- 
ues, and  faith  and  patience  are  necessary  in 
their  moulding.  And  often  there  come  by- 
product results  well  worth  while,  if  unex- 
pected. 

Such  a  case,  where  in  the  work  of  a  gang 
of  a  dozen  men  on  one  operation  over  $30,- 
000  a  year  is  saved,  may  be  cited  as  an  ex- 
ample. 

The  scene  is  laid  in  a  large  factory  where 
leather  in  various  finished  shapes  is  the  prod- 
uct. Now  leather  is  a  very  valuable  material 
in  the  finished  state,  especially  in  certain  ar- 
ticles of  large  and  fine  quality,  but  it  de- 
creases in  value  very  rapidly  when  it  be- 
comes waste.  Therefore  waste  is  to  be  fear- 
fully avoided.  But  it  must  be  noted  that 
Nature,  abetted  by  certain  careless  handlings 
en  route  to  the  final  process,  has  not  ar- 
ranged that  the  bovine  hide  shall  always  be 
perfect,  of  uniform  thickness,  or  each  one 
like  every  other.  The  hide  must  therefore 
be  cut  into  different  parts  for  different  uses, 


4  EXPERIENCES   IN   EFFICIENCY 

and  the  different  parts  trimmed  according 
to  their  particular  conditions.  And  this 
makes  waste. 

At  one  stage  of  the  preparation  of  certain 
leather  for  a  final  use,  the  operation  consists 
in  trimming  off,  from  the  ends  of  certain 
long  heavy  strips,  that  portion  which  (be- 
cause of  thinness  or  other  defects)  is  unfit 
for  the  purpose  of  the  strips. 

The  volume  of  business  at  this  operation 
causes  the  employment  of  about  a  dozen  men, 
working  on  the  day-work  basis:  i.e.,  being 
paid  a  fixed  amount  per  day  or  hour.  These 
men  are  instructed  to  trim  the  strips  accord- 
ing to  their  judgment,  somewhat  trained,  and 
one  inspector  looks  over  all  the  strips  when 
finished,  turning  back  to  the  workmen  any 
strips  not  properly  trimmed. 

Leather  left  on  the  strips  is  worth  on  the 
average  50  cents  per  pound.  The  leather 
waste,  cut  off  at  this  point,  is  worth  about 
10  cents  per  pound — a  very  decided  loss. 

Thus  the  stage  is  set  and  the  conditions 
seem  very  natural. 

But  here  really  exists  a  situation  with 
very  strong  tendencies  to  high  inefficiency, 
which  the  watchfulness  of  a  general  fore- 
man could  not  prevent  very  materially,  and 


PROFITING   BY    WORKMEN  S   TENDENCIES  5 

which  any  effort  of  his  toward  greater  pro- 
duction per  man  was  liable  to  make  worse. 

This  inefficiency  expressed  itself  in  two 
ways :  First,  in  a  small  production  per  day, 
based  on  the  plea  that  too  rapid  work  meant 
careless  trimming  and  high  waste;  second, 
since  no  trimmer  desired  to  have  the  inspec- 
tor throw  back  work  upon  his  hands  for  a 
second  trimming,  he  made  sure,  so  far  as  he 
could  consistently  with  not  making  too  much 
waste,  that  enough  was  cut  off  to  take  it 
safely  past  the  inspector.  These  tendencies 
meant  small  quantity  and  poor  quality  of 
work ;  and  they  were  very  strong  tendencies, 
because  they  were  daily  present  in  a  some- 
what monotonous  task. 

High  efficiency  for  constant  or  increasingly 
better  results  demands  right  tendencies.  The 
ordinary  workman  will  not  continuously 
fight  against  wrong  tendencies  without  re- 
ward. It  is  evident,  then,  that  the  problem 
here  was  to  discover  methods  that  would  re- 
verse the  tendencies,  viz.,  make  them  operate 
towards  more  and  better  work. 

To  accomplish  this,  it  is  plain  to  every 
practical  man  that  some  incentive  must  be 
offered  to  the  workman,  for  the  tendencies 


6  EXPERIENCES    IN    EFFICIENCY 

operate  through  him  and  must  be  counter- 
acted through  him. 

In  the  final  analysis,  from  a  practical 
viewpoint,  the  workman  works  for  money, 
and  appeals  through  other  motives  must  be 
subordinated.  He  has  a  family  to  support, 
or  hopes  to  have,  and  an  increased  weekly 
pay  appeals  strongly  to  him.  Not  that  this 
appeal  is  in  any  sense  confined  to  the  work- 
man, and  it  is  somewhat  unfair  to  him  to  be- 
lieve that,  as  a  rule,  he  does  not  take  pride 
in  his  work,  and  attempt  definitely  to  do  it 
in  what  he  thinks  a  fair  and  capable  manner. 
There  is  a  tremendous  lot  of  human  nature 
in  the  ordinary  everyday  workman,  and  de- 
spite the  occasional  belief  of  many  employers 
to  the  contrary,  he  is  not  in  the  class  of  the 
donkey  with  the  corn  dangling  in  front  of 
him.  He  is  exactly  the  man  his  employer  is, 
only  lacking  some  opportunity,  training,  or 
quality  which  has  placed  the  employer  in 
the  more  fortunate  position.  But  with  his 
pride  in  his  ability  and  his  work,  there  is 
needed,  to  keep  it  up  to  high  and  constant 
pressure,  a  reward  which  he  can  express  in 
things  he  wants.  Such  a  reward  is,  of  course, 
money — although  appreciation  as  an  addi- 
tion is  always  welcome. 


PROFITING  BY   WORKMEN  S   TENDENCIES  7 

The  problem  in  this  case,  then,  narrows 
down  to  the  devising  of  a  proper  money  in- 
centive to  turn  the  tendencies  toward  inef- 
ficiency into  tendencies  toward  efficiency. 

Now  the  universal  form  of  incentive  to 
labor  is  to  pay  it,  in  some  manner,  propor- 
tionately to  increase  of  production  in  the  unit 
of  time.  But  it  is  plain  that  in  this  case  an 
incentive  for  quantity  would  cause  a  haste 
in  trimming  which  would  only  increase  the 
tendency  to  waste,  and  thereby  much  more 
money  might  be  lost  in  waste  than  could  be 
saved  by  increased  production  per  man. 

On  the  other  hand,  an  incentive  to  save 
waste  alone  would  have  the  tendency  to  slow 
up  production  and  materially  increase  the 
labor  cost. 

Very  evidently,  then,  what  was  needed  was 
an  incentive  dealing  with  both  quantity  and 
quality,  in  such  a  way  as  to  get  the  maximum 
production  with  the  minimum  waste.  But 
since  the  saving  of  waste  was  much  more  im- 
portant than  the  obtaining  of  a  large  pro- 
duction, the  incentive  must  be  so  arranged 
that  the  workman  should  with  certainty  net 
the  highest  wage  from  just  that  combination 
of  increase  of  production  and  decrease  of 
waste  which  would  also  net  the  company  the 


EXPERIENCES   IN   EFFICIENCY 

best  returns  of  value.  In  such  an  incentive, 
however,  there  existed  just  as  strong  a  tend- 
ency to  leave  on  bad  leather  as  formerly 
existed  to  cut  off  good  leather.  This  tend- 
ency must  be  controlled  by  honest  inspec- 
tion. Thus  far,  then,  went  the  study  in  hu- 
man tendencies. 

Now  began  that  study  of  surroundings, 
time  of  operation,  mechanical  arrangement, 
tools  and  conditions,  which  every  effort  for 
efficiency  demands.  This  involved  time 
studies,  experiments,  and  records,  in  order 
to  fix  upon  that  maximum  number  of  strips 
which  the  competent  workman  could  trim 
with  the  minimum  waste,  under  the  best  ob- 
tainable conditions. 

Such  studies  involve  experience  and  tech- 
nicalities, and  are  more  interesting  gener- 
ally in  the  result  than  in  the  relation.  Neces- 
sarily there  was  computed  the  saving  to  the 
company  in  labor  for  every  hundred  strips 
trimmed  over  the  average  number  already 
being  produced,  and  the  saving  in  waste  re- 
sulting from  every  %  per  cent  reduction 
under  the  average  percentage  being  made. 

These  studies  accomplished,  there  were 
now  known  the  following  facts : 


PROFITING  BY   WORKMEN  S   TENDENCIES 

Average  number  of  strips  trimmed  per 
day,  with  average  percentage  of  waste. 

Standard  number  that  should  be  trimmed 
per  day  with  standard  minimum  waste. 

Saving  to  be  made  to  the  company  by  every 
unit  of  advance,  both  in  increase  of  produc- 
tion and  in  decrease  of  waste,  in  passing 
from  the  average  to  the  standard. 

An  analysis  of  the  tendencies  of  workman 
handling  the  strips,  and  an  incentive  devised 
to  make  these  tendencies  right. 

It  thus  became  a  fairly  easy  matter  to  ar- 
range the  incentive  at  a  base  rate  per  hun- 
dred strips  trimmed,  with  the  waste  at  the 
average  percentage  and  with  an  additional 
rate  per  hundred  for  every  %  per  cent  of 
waste  saved,  and  a  decrease  of  rate  per  hun- 
dred for  every  %  per  cent  added  to  the  aver- 
age. Thus  the  rates  might  look  like  this : 


Percent  of  Waste  Cents  per  100 

7  46 

6%  47 

61/2  48 

6%  49 

6  (Base  Rate)                                50 

53,4  51 

51/2  52% 
51/4 

5  57 


10  EXPERIENCES   IN   EFFICIENCY 

That  these  figures  are  not  the  actual  ones 
does  not  make  less  their  ability  to  illustrate 
the  method  of  reward  offered  for  betterment, 
and  penalty  assessed  for  doing  worse  than 
the  average. 

In  fixing  the  additional  rates  there  had  to 
be  taken  into  account  two  things — the  amount 
saved  to  the  company  by  better  work,  and 
that  portion  of  the  saving  which  would  be 
sufficient  to  cause  the  workman  to  strive 
to  make  it;  for  men  will  make  increased  ef- 
forts only  for  what  they  consider  a  reason- 
able reward. 

There  yet  had  to  be  counteracted  the  tend- 
ency of  this  method  to  make  the  workman 
leave  on  bad  leather  to  make  his  percentage 
of  waste  low;  and  this  was  accomplished  by 
very  materially  increasing  the  salary  of  the 
inspector,  with  the  warning  that  his  job  de- 
pended on  no  bad  leather  getting  past  him. 
He  now  had  a  much  better  paid  job  than  he 
had  ever  expected.  It  was  too  good  to  lose, 
and  he  volunteered  the  remark  that  "any 
guy  what  got  past  him  with  any  bad  stuff 
that  lost  him  his  job  was  in  danger  of  his 
life."  He  still  has  the  job,  with  no  casualties 
reported. 

The  new  methods  were  now  put  into  opera- 


PROFITING  BY   WORKMEN'S   TENDENCIES          11 

tion;  but  before  success  could  be  assured 
there  were  still  conditions  to  be  regulated. 
Methods  alone  are  inanimate.  They  must  be 
animated,  to  be  successful.  Many  good  ones 
fail  for  lack  of  this  addition  of  a  soul.  In 
the  first  place,  efficiency  is  the  result  of  con- 
certed effort,  and  this  does  not  generally 
come  except  through  enthusiasm.  This  is 
to  say,  indeed,  that  efficiency  founds  itself 
on  a  state  of  mind,  and  this  is  a  very  vital 
point  to  consider.  To  create  in  the  workmen 
enthusiasm  for  the  new  methods,  it  was  first 
necessary  to  assure  them  that  the  incentives 
were  fair  and  that  the  opportunities  before 
them  were  real.  Certain  guarantees  had  to 
be  made  against  any  loss  to  them.  Consid- 
erable attention  had  to  be  paid  them  in  the 
matter  of  judgment  of  good  and  bad  leather, 
and  in  the  way  of  training  them.  And  espe- 
cially was  it  essential  to  encourage  and  assist 
those  who  were  known  to  be  the  most  skilful, 
in  order  that  they  might,  as  an  example, 
make  some  worth-while  pay-envelopes.  Once 
the  possibilities  were  developed  by  one  or 
two,  there  quickly  grew  the  desire  in  others ; 
a  friendly  rivalry  as  to  records  and  pay 
sprang  up,  the  monotony  of  the  work  van- 
ished, and  efficiency  had  arrived. 


12  EXPERIENCES   IN   EFFICIENCY 

The  company  itself  learned  things  it  had 
not  properly  appreciated  before.  Urged  by 
disputes  between  the  workmen  and  the  in- 
spector, it  made  more  careful  tests  (through 
a  testing  machine)  as  to  what,  for  the  par- 
ticular purpose  desired,  really  did  consti- 
tute good  and  bad  leather. 

Likewise,  as  is  always  the  case  when  men 
are  put  on  their  mettle — in  a  battle,  in  a 
game,  and  in  work  as  well — when  a  measur- 
able call  for  ability  was  made,  it  soon  de- 
veloped that  certain  men,  by  their  perform- 
ances, showed  clearly  their  superior  skill  in 
getting  out  a  large  production,  combined 
with  the  judgment  of  just  where  to  cut  to 
make  the  least  waste — and  others  showed 
their  lack  of  adaptability  for  the  work.  This 
discovery  very  soon  brought  about  better 
training  of  the  men,  and  also  some  readjust- 
ments in  the  plant  which  brought  to  this  op- 
eration the  men  most  capable  for  it. 

The  day-work  method  of  payment  permits 
many  a  man  to  work  at  a  task  for  which  he 
has  neither  taste  nor  ability,  when  he  might 
make  his  mark  at  some  other.  Proper  incen- 
tive methods  pick  out  the  able  men  and  often 
force  out  the  unable,  not  infrequently  into 
tasks  at  which  they  achieve  greater  success. 


PROFITING   BY   WORKMEN'S   TENDENCIES  13 

Touched  thus  by  the  wand  of  efficiency, 
the  net  result  of  these  changes  in  this  opera- 
tion was  remarkable.  The  men  made  very 
much  better  wages,  and  found  a  real  interest 
in  the  attempt  to  make  good  records  and  good 
pay  weekly.  They  had  now  something  defi- 
nite to  work  for.  But  to  the  company  came 
the  magical  result.  In  six  months  the  per- 
centage of  waste  had  dropped  to  one-third 
of  the  former  average,  and  the  production 
per  man  had  materially  increased,  effecting, 
as  previously  stated,  a  saving  in  operation 
of  over  $30,000  a  year. 

Thus  a  study  in  tendencies  led  to  a  great 
efficiency,  through  quality  piece-work. 


CHAPTER   II 

A  PKOBLEM   OF   QUALITY   OF  WORKMAN- 
SHIP 

TN  manufacturing,  the  problem  of  quality 
•*•  of  workmanship,  or,  perhaps,  to  put  it 
more  practically,  the  problem  of  producing 
articles  to  a  predetermined  standard  of  qual- 
ity, is  ever  present,  and  never  completely 
solved  to  a  thoroughly  satisfactory  degree, 
even  in  the  best  managed  plants.  Even  in 
articles  of  few  parts  and  involving  few  pro- 
cesses, there  constantly  occur  difficulties  and 
defects,  some  natural  and  some  avoidable, 
causing  complaints  and  losses. 

Multiply  the  few  parts  into  a  greater  num- 
ber, many  of  them  being  small ;  the  processes 
into  many  and  delicate  ones;  and  the  pro- 
duction into  large  volume  (as  in  the  case  of 
many  complicated  machines,  like  the  type- 
writer, the  automobile  and  so  on),  and  the 
possibilities  of  loss  and  delay  may  be  multi- 
plied still  more  rapidly.  There  are  those  who 

14 


SECURING  QUALITY  OF   OUTPUT  15 

may  desire  to  make  the  further  observation 
that  if  to  these  multiplications,  there  be  fur- 
ther added  the  substitution  of  piece  work 
or  incentive  methods  in  place  of  day  work, 
the  problem  of  obtaining  standard  quality 
is  still  further  complicated;  and  it  is  not  to 
be  denied  that  under  improper  conditions 
a  tendency  toward  deterioration  naturally 
lurks  in  any  incentive  method  that  tends  to 
hurry  the  mind  or  body  of  the  workman. 

Nevertheless,  considerable  experience  has 
shown  that  quality  of  workmanship  is  not 
a  matter  of  day  work  or  piece  work,  of  slow 
work,  or  rapid  work.  Quality  is  a  matter 
of  systematic  insistence.  That  plant  which 
demands  a  standard  quality  from  its  work- 
men and  aids  them  by  proper  appliances, 
training  and  discipline,  obtains  it  equally 
well  under  either  plan  of  payment.  And 
there  are  very  many  plants  operating  today 
under  incentive  methods,  yet  producing 
higher  quality  goods  than  similar  plants  op- 
erating by  the  day-work  plan. 

The  necessity  of  the  constant  struggle  for 
standard  quality  of  workmanship  is  the  very 
natural  outcome  of  three  main  weaknesses 
of  human  nature  as  applied  to  modern  in- 
dustrial production — (1)  wide  variations  in 


16  EXPERIENCES 'IN   EFFICIENCY 

the  natural  skill  and  in  the  past  training  of 
operatives,  due  somewhat  to  the  lapse  of  the 
apprenticeship  system;  (2)  the  constant  ex- 
pression of  a  lack  of  interest  and  concentra- 
tion on  the  part  of  a  certain  percentage  of 
the  operatives,  not  sufficiently  counteracted 
by  discipline;  and  (3)  a  failure  on  the  part 
of  the  management  to  make  proper  prepara- 
tions, to  give  proper  instructions  and  train- 
ing, and  to  maintain  necessary  discipline. 

It  is  not  practically  conceivable  that  these 
weaknesses  will  find  any  radical  and  uni- 
versal remedy  within  the  very  near  future, 
even  if  it  may  be  said  that  modern  methods 
are  creating  a  tendency  constantly  to  reduce 
them.  Nevertheless  the  practical  man  finds 
himself  impelled  to  seek  definite  remedies  to 
suit  his  particular  needs,  and  perhaps  the 
methods  employed  in  the  case  of  one  large 
plant  may  be  of  interest  as  illustrating  a 
successful  method  of  betterment,  not  merely 
of  quality  of  workmanship  but  of  other  at- 
tendant results. 

Consider,  then,  the  elements  of  the  situa- 
tion: A  large  plant  with  some  twenty  de- 
partments, consisting  in  storerooms  for 
rough  and  finished  parts,  machine  shops,  tin 
shop,  forge,  paint  shop  and  assembling 


SECURING   QUALITY   OF   OUTPUT  17 

rooms ;  with  about  six-hundred  operatives, 
the  number  fluctuating  somewhat  according 
to  the  season  of  the  year;  producing  in  pre- 
determined yearly  quantities  a  machine  of 
numerous  parts,  many  of  which  are  small, 
and  undergoing  in  their  preparation  from 
five  to  twenty  operations  each,  these  opera- 
tions frequently  performed  by  as  many  dif- 
ferent operatives — the  parts  being  ordered 
in  the  rough  from  foundry  or  forge  or  cut 
from  raw  material,  being  worked  upon  in 
the  preparatory  departments  in  lots,  till, 
passing  through  the  finished  stores  to  as- 
sembling rooms,  they  are  first  assembled  into 
sections  and  the  sections  then  assembled  into 
the  finished  machine. 

Such  a  situation  is  a  rather  usual  one  for 
many  factories,  and  theoretically  it  would 
seem  (after  the  questions  of  design  are  set- 
tled) rather  a  simple  one  to  plan  and  to  push. 
But  the  practical  man  will  recognize  at  once 
the  many  probabilities  of  difficulties,  delays, 
and  losses,  even  granted  that  the  large  prob- 
lem of  getting  all  the  parts  into  the  plant 
and  started  to  the  first  operation  has  been 
satisfactorily  accomplished. 

In  practice  the  parts  were  started  through 
the  plant  in  lots  of  10  to  200  pieces,  accord- 


18  EXPERIENCES   IN   EFFICIENCY 

ing  to  size  and  length  of  operations,  the  in- 
tent being  that  no  lot  should  be  so  large  in 
bulk  or  number  as  to  halt  more  than  a  rea- 
sonable time  at  any  one  operation,  so  that 
it  might  be  unnecessary  to  split  it.  And,  of 
course,  there  were  very  many  lots  constantly 
on  the  march  towards  the  finished  stores  and 
assembling  departments. 

All  this  sounds  very  simple  and  orderly 
in  recital.  The  imagination  can  readily  pic- 
ture these  parts,  grouped  in  lots,  in  boxes 
where  possible,  properly  ticketed  with  in- 
formation, progressing  from  department  to 
department  through  needed  operations  of 
finishing,  and  all  arriving  finally  to  their  in- 
tended use  and  function  in  the  complete  ma- 
chine— for  of  course  this  is  exactly  what  the 
plant,  its  organization  and  methods,  existed 
for.  But  the  actual  practice  might  readily 
have  been  compared  to  numerous  bodies  of 
soldiers  starting  in  good  order  to  a  battle 
rendezvous,  going  through  the  struggle,  and 
assembling,  though  victorious,  in  much  de- 
pleted array.  For,  under  the  conditions  ex- 
isting, while  some  lots  came  through  quickly 
and  intact,  others  came  through  much  dim- 
inished in  numbers  and  the  missing  parts 
could  never  be  found.  Still  others  came 


SECURING   QUALITY   OF   OUTPUT  19 

through  entirely  or  in  part  unfit  for  use. 
Some  halted  in  their  progress  until  insistent 
cries  from  the  assembling  room  started  trac- 
ers after  them  to  give  them  a  push  along 
their  way.  And  some  lots  disappeared  en- 
tirely, or  were  discovered  only  after  dupli- 
cates had  been  ordered  to  take  their  place. 

Despite  the  fact,  then,  that  completed  man- 
ufacture went  on  and  many  successful  ma- 
chines were  shipped  out,  the  net  result  of 
this  situation  was  that  the  floors  of  the  de- 
partments, especially  in  the  busier  season, 
were  clogged  with  parts;  foremen  and  trac- 
ers were  kept  busy  searching  and  "hustling" 
needed  parts,  and  delays  in  the  assembling 
room  caused  much  loss  of  time  and  money; 
and  the  disappearance  and  loss  of  parts 
through  poor  workmanship  mounted  up  to  a 
considerable  sum. 

A  peaceful  canal  running  past  some  of 
the  machine  shops  had  the  even  tenor  of  its 
way  frequently  and  rudely  interrupted  by 
the  impact  of  spoiled  parts  passing  swiftly 
and  mysteriously  out  of  the  windows,  and 
it  was  said  to  have  a  steel-lined  bottom;  a 
well-known  quotation,  representing  a  certain 
spirit  in  the  shop,  which  frequently  followed 


20  EXPERIENCES    IN    EFFICIENCY 

them,  was  "what  the  eye  don't  see,  the  heart 
don't  grieve  for." 

Now,  of  course,  there  can  be  no  pretense 
that  any  such  situation  could  be  character- 
ized as  efficient,  yet  it  is  not  different,  if  the 
imagination  is  not  forced  in  this  conception, 
from  that  which  exists  in  many  plants.  And 
this  plant  made  a  fair  profit. 

The  first  necessity  in  any  attempt  at  a 
remedy  was  an  analysis  to  discover  the 
underlying  reasons  why  delays  and  losses 
seemed  to  occur  constantly,  as  if  there  were 
some  evil  principle  at  work.  It  was  not  diffi- 
cult, of  course,  to  find  the  reasons  in  many 
given  cases,  and  though  they  varied  consid- 
erably in  detail,  it  soon  became  clear  that 
loss  and  spoiling  of  parts  were  definitely  due, 
at  the  bottom,  to  the  fact  that  very  many  op- 
eratives did  not  have  (and  could  hardly  be 
expected  to  have)  any  idea  of  the  use  and 
function  of  most  of  the  parts  they  worked  on. 
They  were  therefore  performing  their  me- 
chanical operations  doubly  mechanically  and 
monotonously,  and  did  not  have  either  that 
supervision  or  that  sense  of  constant  ac- 
countability which  is  necessary  to  counteract 
such  a  condition.  The  loyalty  and  pride  of 
work  which  might  have  been  of  material  as- 


SECURING   QUALITY   OF   OUTPUT  21 

sistance  here  did  not  sufficiently  exist,  be- 
cause the  somewhat  seasonable  nature  of  the 
work  made  many  of  the  operatives  transients, 
and  generally  of  the  less  skilled  class.  Of 
course  there  were  many  loyal,  skilful  men 
and  there  were  good  reasons  generally  for 
losses  for  which  they  were  responsible. 

The  delays  were  readily  traceable  to  the 
fact  that  the  parts  were  inanimate,  and 
moved  forward  only  at  the  volition  of  an  ani- 
mated system,  while  the  management,  in 
their  order  system,  foremen  and  tracers,  had 
supplied  this  so  that  it  was  a  spasmodic 
rather  than  a  continuous  operating  plan. 

The  problem,  therefore,  in  the  search  for 
quality  and  satisfactory  movement  was  to 
discover  and  put  into  effect  those  methods 
which  would  give  each  operative  the  desire 
to  perform  every  operation  he  undertook  in 
his  best  style,  and  to  supply  animation  to 
the  lots  as  desired. 

Now  it  is  a  fortunate  quality  of  efficiency, 
not  sufficiently  used  as  a  basis  of  operation, 
that  very  frequently  the  simple  method  is 
the  best,  and  sometimes  it  is  the  only  suc- 
cessful one.  This  is  recognized  often  un- 
consciously when  it  is  said  of  some  plan  or 
mechanical  arrangement  which  is  successful ; 


22  EXPERIENCES   IN   EFFICIENCY 

"How  simple!  Why  wasn't  that  thought  of 
before?"  Efficiency  in  its  conception  is  not 
at  all  a  complicated  proposition  requiring 
wonderfully  ingenious  devices.  But  a  fre- 
quent trouble  with  the  obvious  method  is 
that  it  involves  expense,  and  requires  pa- 
tience and  persistence  to  get  into  operation, 
so  that  faith  and  imagination  are  required 
in  the  inception  and  through  the  develop- 
ment. 

The  philosophy  of  Hamlet  that  it  may  be 
"better  to  bear  those  ills  we  have  than  fly 
to  others  that  we  know  not  of "  has  undoubt- 
edly found  many  followers  in  the  ranks  of 
manufacturers  in  their  consideration  of  the 
methods  of  efficiency. 

In  this  case  any  method  effective  in  mak- 
ing each  man  intent  on  the  quality  of  his 
work,  must  make  it  very  clear  to  him  that 
at  the  completion  of  each  job  the  manage- 
ment would  know  just  how  well  or  poorly  he 
had  done  it,  and  that  he  should  expect  to 
be  held  definitely  responsible  for  lost  or 
spoiled  parts.  This  is  merely  operating 
along  the  lines  demanded  by  the  ordinary 
human  nature  of  the  situation,  a  necessity 
lying  at  the  root  of  all  methods  of  labor  effi- 
ciency. 


SECURING   QUALITY   OP   OUTPUT  23 

The  obvious  necessity,  then,  was  that  each 
lot  of  parts  should  be  inspected  and  reported 
upon  after  each  operation.  Such  a  plan 
would  bring  about  a  simple  but  vast  differ- 
ence ;  for,  instead  of  a  general  knowledge  that 
parts  were  spoiled  or  missing  when  the  lot 
reached  the  finished  stores  or  assembly 
rooms  (creating  possibly  an  investigation  in- 
volving a  dozen  or  so  men,  some  of  whom 
might  have  left  in  the  meanwhile,  and  cover- 
ing frequently  a  considerable  lapse  of  time, 
all  of  which  investigations  usually  end  in 
befogging  disputes),  there  was  substituted 
a  definite  responsibility,  readily  placeable  on 
one  man  at  the  moment.  Such  a  method,  as 
indeed  proved  to  be  the  case,  immediately 
tended  to  relieve  the  work  of  monotony,  since 
it  introduced  to  each  operative  a  definite  and 
constant  accountability,  and  brought  inqui- 
ries as  to  methods,  uses,  and  needs,  which 
much  elevated  the  tone  and  interest  in  the 
shop. 

Now  this  plan  necessarily  involved  a  corps 
of  inspectors  and  a  definite  expense,  always 
a  point  of  much  consideration  to  the  execu- 
tive, and  properly  so.  On  the  other  hand, 
it  carried  with  it  measurable  possibilities 
of  the  saving  of  lost  and  spoiled  parts,  and 


24  EXPERIENCES   IN  EFFICIENCY 

in  addition  promised  a  fine  means  of  bring- 
ing parts  through  the  shop  in  desirable  or- 
der for  the  saving  of  delays  in  assembling. 
It  proved  not  too  difficult  a  proposition  to 
balance  the  estimated  cost  of  inspection 
against  probable  savings  of  losses  and  delays 
and  the  plan  was  accepted. 

It  is  not  to  be  maintained  that  in  all  such 
circumstances  a  similar  decision  might  have 
been  adopted.  It  is  not  true  of  methods  of 
efficiency  that  if  successful  in  one  plant  they 
are  necessarily  similarly  applicable  in  an- 
other. The  principles  of  efficiency  are  always 
operatable,  but  it  frequently  happens  that  a 
particular  principle,  effective  and  profitable 
when  carried  out  by  a  given  method  under 
certain  conditions,  human  or  mechanical, 
under  different  conditions,  may  need  to  be 
applied  by  some  other  method  to  be  profit- 
able. Herein,  indeed,  lies  the  necessity  and 
value  of  ingenuity  in  efficiency  application. 

In  the  given  case,  the  plan  being  decided 
upon,  it  was  proceeded  upon.  And  the 
method  of  it  was  this: 

An  independent  inspection  department 
with  a  chief,  a  clerk  and  a  corps  of  inspec- 
tors chosen  from  the  best  men  in  the  plant, 
was  established.  This  corps  comprised  about 


SECURING    QUALITY   OF   OUTPUT  25 

ten  men  eventually ;  but  since  it  absorbed  the 
tasks  formerly  occupying  the  time  of  three 
or  four  tracers  of  lost  and  delayed  parts, 
there  was  a  net  addition  of  only  six  or  seven, 
at  an  approximate  cost  of  $6,000  or  $7,000. 
The  department  was  equipped  with  blue-print 
drawers  and  ample  inspection  tools. 

All  parts  were  issued  from  the  rough 
stores  (where  they  were  received  at  the  fac- 
tory) in  lots,  the  number  in  which  depended 
upon  the  size  and  intricacy  of  operation. 
These  lots  were  sent  to  the  operating  depart- 
ments through  the  inspection  department, 
after  passing  inspection. 

With  each  lot  went  a  lot  card  stating  the 
lot  number,  part  number,  blue-print  number, 
operation  numbers,  number  of  pieces  in  the 
lot,  and  any  other  necessary  information. 
This  card,  guarded  against  loss  by  the  in- 
spection after  each  operation,  followed  the 
lot  through  to  the  finished  stores,  and  pre- 
sented to  the  observer  a  history  of  any  loss 
or  delay. 

With  each  lot  was  also  issued  a  time  note 
with  necessary  details  thereon,  on  which  was 
the  rate,  if  an  incentive  method  was  used. 
Of  course  it  eventually  contained  such  neces- 
sary data  as  the  name  and  number  of  op- 


26  EXPERIENCES   IN   EFFICIENCY 

erative  and  time  of  starting  and  finishing, 
and  the  inspector  marked  on  it  the  number 
of  good  parts  finished,  and  the  number 
spoiled,  with  cause,  before  it  was  turned  in 
to  the  inspection  department  clerk.  Each 
lot  was  thus  constantly  equipped  with  com- 
plete information. 

As  the  lots  were  finished  in  each  opera- 
tion, they  were  inspected  and  the  cards  were 
properly  marked,  each  inspector  reporting 
daily  as  to  what  he  inspected,  with  full  in- 
formation as  to  the  result,  and  the  lots  were 
passed  along  physically  to  the  point  of  the 
next  operation. 

This  inspection  took  place  as  often  as  was 
possible  in  the  inspection  room  when  the 
parts  could  be  easily  brought  there  after 
the  operation  or  where  the  inspection  was 
important  as  to  exactness.  In  those  cases 
where  the  parts  were  large  and  expensive  to 
move,  or  where  the  principal  item  of  inspec- 
tion was  a  verification  of  the  count,  as  in  a 
roughing  operation,  the  parts  were  inspected 
in  the  department  where  they  were  operated 
upon.  Common  sense  decided  each  case. 

The  clerk  in  the  inspection  department  had 
in  his  charge  large  cards,  one  for  every  ma- 
chine part,  of  different  colors  for  different 


SECURING   QUALITY   OF   OUTPUT  27 

sections  of  the  machine.  These  cards,  filled 
from  the  time  notes  daily,  showed  the  entry 
of  each  lot  of  parts  into  the  factory  and  its 
progress  by  dates  through  the  various  op- 
erations, with  all  casualties  reported. 

Now  this  is  all  very  simple  and  straight- 
forward in  method  and — dull  in  recital,  even 
without  further  details  added  in  the  develop- 
ment of  the  plan.  For  interesting  as  ef- 
ficiency methods  are  in  their  development 
and  operation,  it  would  take  more  than  a 
Jack  London  to  emotionalize  these  details  in 
script  to  make  their  description  fall  among 
the  best  sellers.  The  general  reading  imagi- 
nation, readily  as  it  pictures  and  enjoys  the 
unreal,  emotional,  and  adventurous,  refuses 
to  deal  after  working  hours  with  the  affairs 
of  everyday  business  life  and  the  educa- 
tional, for  perhaps  after  all,  to  the  majority, 
these  are  dull  and  dry. 

Of  course,  simple  as  this  plan  was,  it  had 
to  undergo  development,  for  development  is 
essentially  the  means  by  which  an  efficiency 
method  passes  from  the  theoretical,  where  it 
is  believed  in  by  a  few,  to  the  practical  where 
it  is  operated  by  all.  In  every  plant  of  any 
size,  it  will  readily  be  understood,  there  are 
many  varying  opinions,  habits,  rights  or  sup- 


28  EXPERIENCES   IN   EFFICIENCY 

posed  rights,  customs,  and  individual  meth- 
ods, not  to  speak  of  physical  obstructions, 
all  of  which  must  swing  into  average  accord 
with  any  plan  before  it  becomes  effective. 
This  development  consisted  first  of  a  slow 
spread  of  the  inspection  to  cover  all  parts 
and  all  departments,  taking  weakest  spots 
first,  and  thereafter  of  a  refining  process. 
First  the  newness  of  the  plan  had  to  wear 
off.  The  inspectors  had  to  be  trained  to 
work  rapidly  and  systematically,  to  know 
what  to  inspect  carefully  and  what  roughly, 
and  not  to  wait  around  to  be  sent  here  and 
there,  so  that  the  cost  of  inspection  might 
be  kept  at  a  minimum.  In  short,  the  inspec- 
tors had  to  be  trained  to  inspect  accurately 
and  rapidly  and  to  do  a  day's  work.  It  took, 
of  course,  some  time  to  decide  in  each  case 
where  the  parts  should  be  inspected,  i.e.,  at 
point  of  operation  or  in  the  inspection  de- 
partment. Some  time  must  pass  also  before 
the  operatives  got  accustomed  to  having 
their  work  inspected  without  agitation  and 
comment,  and  without  some  embarrassment 
on  the  part  of  the  inspector  if  in  their  pres- 
ence. In  fact,  the  whole  proposition  had  to 
work  itself  into  a  routine  affair  where  the 
inspectors,  chosen  men,  did  a  full  and  un- 


SECURING  QUALITY  OF  OUTPUT  29 

biased  day's  work  and  reported  facts.  It 
took  some  time,  of  course,  to  bring  order 
and  sequence  of  the  flow  of  the  lots  to  the 
finished  stores,  instead  of  the  former  spas- 
modic and  erratic  movement. 

But  the  plan  adopted  in  a  few  months  be- 
came very  effective,  for,  once  the  operatives 
learned  that  the  result  of  each  job  they  did 
was  a  matter  of  record,  and  that  they  were 
subject  to  criticism  and  in  many  cases  to 
actual  loss  of  pay  or  position,  the  quality 
of  their  workmanship  vastly  improved,  and 
the  disappearance  of  parts  and  the  number 
spoiled  very  shortly  fell  to  a  minimum.  The 
poor  and  careless  workmen  very  soon  be- 
trayed themselves.  Questions  as  to  uses 
of  parts,  possibilities  of  machinery,  demands 
for  jigs  and  all  helpful  appliances,  became 
more  frequent;  the  saving  amply  justified 
the  expense,  and  the  canal  again  flowed 
peacefully  on  undisturbed  by  the  surrepti- 
tious Jeer-plunk.  It  had  to  conceal  no  more 
industrial  crimes. 

But  this  was  not  by  any  means  the  whole 
gain.  The  cards  of  the  inspectors'  clerk, 
giving  the  history  and  position  in  operations 
and  departments  of  every  part,  soon  became 
the  basis  of  knowledge  and  operation  of  a 


30  EXPERIENCES   IN   EFFICIENCY 

proper  routing  system.  The  finished  stores, 
issuing  in  advance  the  assembling  orders, 
could  demand  (with  great  certainty  of  ob- 
taining them)  any  desired  parts,  thus  elimi- 
nating delays  in  assembling;  and  the  saving 
did  not  end  even  here,  for  the  method  of  con- 
trol of  the  movements  of  the  parts  soon 
brought  about  better  physical  order  in  the 
departments  and  kept  in  front  of  each  op- 
erative ample  work  for  himself  and  machine, 
thus  cutting  out  delays  on  his  part  and  es- 
sentially increasing  the  production  per  man 
of  total  parts  worked  on,  even  in  addition 
to  the  increase  of  good  parts  produced  by 
the  reduction  of  the  number  of  the  spoiled 
parts.  The  relief  to  the  foremen  was  of 
course  also  very  great.  Their  time,  formerly 
largely  spent  in  hunting  and  pushing  needed 
parts,  could  now  be  spent  in  looking  after 
their  departments  in  the  way  logically 
planned  for  them,  and  the  knowledge  of  the 
result  of  each  operative's  work  gave  them 
some  command  of  the  situation. 

In  fact,  as  is  always  the  case  when  a  par- 
ticular efficiency  method  is  introduced  to 
remedy  some  particular  fault,  especially 
when  order  is  brought  about,  many  other 


SECURING   QUALITY   OF   OUTPUT  31 

faults  were  likewise  remedied  and  economies 
unsuspected  were  made. 

Thus  by  the  obvious  method  and  the  cour- 
age of  expenditure  based  on  a  right  princi- 
ple, loss  of  material  and  labor  was  much  re- 
duced and  production  increased  by  the  re- 
moval of  delays,  and  the  ideal  function  of 
the  plant  to  receive,  finish  and  assemble 
parts  into  workable  machines  was  more 
closely  attained. 


CHAPTER   III 
WASTE    SAVING    THKOUGH   PIECE  WORK 

TN  these  days  of  increasing  agitation  for 
A  economical  methods  of  manufacture,  per- 
haps the  element  that  receives  the  most  uni- 
versal attention  is  that  of  labor.  This  is 
not  to  say  that  there  are  not  other  elements 
of  very  large  importance  from  the  stand- 
point of  possibilities  of  economy  in  every 
business,  and  indeed,  in  some  plants,  of 
greater  economical  significance  than  labor. 
But  in  the  first  place  many  of  these  other 
elements  have  received,  and  are  receiving, 
in  a  progressive  systematic  manner,  such 
attention  as  to  bring  not  only  constant  im- 
provement, but  (which  is  really  very  much 
more  to  be  desired  in  the  plan  of  things) 
to  open  up  still  larger  fields  of  returns  for 
human  effort.  And  in  the  second  place  the 
quick  returns  on  intelligent  action,  the  hu- 
man interest  involved,  the  increasing  profit 
that  lies  in  volume  of  production,  the  un- 

32 


QUALITY   PIECE   WORK  33 

limited  possibilities  of  increase  of  product 
per  hour  that  every  man  seems  capable  of 
developing,  and,  perhaps  not  a  little,  the  fact 
that  in  any  plant  more  energies  and  brains 
become  immediately  interested  and  active 
when  the  element  of  labor  is  dealt  with,  make 
it  of  supreme  interest. 

And  so  we  are  developing  the  possibili- 
ties of  this  element  through  motion  studies 
and  scientific  analysis,  and  coaxing  it  on 
through  its  human  side  by  the  incentives  of 
piece  work,  premium  plans,  bonus  methods, 
efficiency  standards,  etc.,  with  economical  re- 
sults as  to  cost,  and  with  a  hope  that  in  the 
long  run,  all  this  will  lead  to  decreasing  sell- 
ing prices.  But  there  are  those  who  think 
that  this  latter  could  be  radically  effected 
much  more  quickly  by  a  decrease  in  the 
tariff,  the  discovery  of  a  plan  of  distribu- 
tion more  direct,  or  a  law-compelled  or 
heaven-sent  abnegation  on  the  part  of  capi- 
tal of  all  unreasonable  profits. 

However,  to  return  to  labor,  it  must  be 
acknowledged  that  very  good  economical  re- 
sults are  being  obtained  by  the  various 
studies  and  methods  employed,  and  that  a 
new  era  of  labor  values  is  being  developed. 
It  cannot  be  denied  that  too  often  the  incen- 


34  EXPERIENCES   IN   EFFICIENCY 

tive  back  of  the  introduction  of  these  mod- 
ern methods  in  labor  handling  is  solely  the 
narrow  one  of  plant  profit,  and  not  the 
broader  one  of  mutual  benefit  to  labor  and 
capital  alike.  Yet  it  is  a  fact  of  observation 
that  when  these  methods  of  incentive  have 
been  introduced  with  a  sense  of  fairness  and 
appreciation  of  the  full  and  continuous 
rights  of  labor,  the  net  results  to  capital  have 
been  even  greater  than  when  the  work  was 
done  in  a  narrow  way,  since  such  operation 
has  aroused  the  most  liberal  spirit  of  friend- 
ly co-operation,  which  is  most  absolutely  and 
essentially  the  true  basis  of  all  of  these  meth- 
ods. And  it  is  not  to  be  doubted  that  through 
such  a  spirit  of  co-operation  lies  a  develop- 
ment of  this  great  problem  that  will  lead  to 
Utopian  results. 

But  in  all  this  effort  to  increase  the 
product  per  man-hour,  quality  must  not  be 
forgotten.  In  the  matter  of  moving  materi- 
als, of  much  rough  work,  and  even  of  a  good 
deal  of  work  with  precision  and  automatic 
tools,  haste  does  not  make  waste  nor  affect 
the  desired  quality.  But  there  are  many 
operations  and  articles  where  judgment  and 
care  play  a  material  part  in  the  items  of 


QUALITY   PIECE   WORK  35 

quality  and  waste,  and  the  unquestionable 
tendency  of  haste  is  to  deteriorate. 

This  latter  is  the  statement  that  is  met 
when  methods  of  labor  payment  according 
to  product  are  suggested  to  the  manufac- 
turer who  is  proud  of  the  high  grade  of  his 
product,  and  who  guards,  as  the  secret  of 
his  profits,  against  any  tendency  towards  de- 
terioration. And  certainly  no  advance  is 
made,  either  from  a  profit  point  of  view 
when  one  element  of  cost  is  decreased  at  the 
later  expense  of  the  selling  price,  or  from 
a  broader  materialistic  point  of  view  when 
a  poorer  article  is  made  from  good  material 
which  care,  would  make  into  a  better  article. 

One  hears  much  complaint,  whether  with 
a  true  basis  or  not,  that  workmen  are  not  so 
skilled,  so  careful,  as  they  used  to  be;  that 
articles  are  not  put  together  so  solidly  and 
well  as  formerly.  If  this  is  true,  as  indeed 
it  may  be  in  cases,  it  is  only  fair  to  labor  to 
say  that  it  is  probably  more  the  fault  of 
the  design,  the  plan,  the  attempt  to  imi- 
tate cheaply  some  popular  or  high-priced 
article,  or  perhaps  even  more  than  these  the 
different  divisions  and  training  of  labor, 
brought  about  by  modern  methods,  than  the 
fault  of  labor  itself.  Nevertheless,  some 


36  EXPERIENCES   IN   EFFICIENCY 

years  of  experience  in  many  varied  indus- 
tries have  left  the  conviction  that  quality  is 
a  matter  of  insistence,  rather  than  of  meth- 
ods of  either  day  or  piece  work.  That  is  to 
say,  that  in  that  plant  where  a  given  stand- 
ard of  quality  is  insisted  upon,  the  workmen 
will  work  to  it  whether  they  be  paid  on  a 
day-work  or  piece-work  basis. 

To  obviate  any  danger  of  retrogression  in 
quality  and  loss  through  waste  by  possible 
carelessness  on  the  part  of  workmen  hasten- 
ing toward  daily  increase  of  production  on 
account  of  the  rewards  offered  by  the  piece- 
work or  other  plan,  the  writer,  working  as  a 
business  economist,  devised  and  put  suc- 
cessfully into  operation  in  several  plants  a 
plan  of  piece  work  in  which  the  rate  varies 
with  the  quality  and  per  cent  of  waste,  so 
that  the  daily  pay  of  the  operator  depends 
not  merely  upon  the  quantity  done  per  day, 
but  very  largely  on  the  quality  of  the  work. 
There  is  nothing  new  under  the  sun,  it  is 
said,  and  it  would  not  be  wonderful  if  one 
or  more  of  the  minds  that  have  for  years 
been  working  on  these  problems  should  have 
evolved  some  similar  methods.  Neverthe- 
less, neither  at  the  time  of  introduction  of 
these  methods,  five  or  six  years  ago,  nor 


QUALITY   PIECE   WORK  37 

since,  has  any  similar  method  come  to  his 
attention. 

There  are  many  articles  the  manufacture 
of  which,  both  as  to  quality  and  the  waste 
of  raw  materials,  can  be  gauged  very  accu- 
rately ;  in  which  no  great  scope  of  judgment 
is  allowed;  in  which  accurate  measurement 
and  prearranged  jigs  and  tools  play  a  guid- 
ing and  correcting  part.  There  is  little 
chance  for  judgment  or  waste,  except 
through  punishable  carelessness,  in  the  work 
of  machining  to  blue-print  size  a  casting, 
perhaps  with  jigs  and  fixtures.  Here,  and  in 
many  like  cases,  piece  work  finds  a  safe 
economy. 

But  there  are  many  operations  in  very 
many  staple  businesses  where  haste  and 
carelessness  may  spoil  much  material,  or 
where  care  and  interest  may  save  more  in 
material  than  the  total  wages  of  the  worker. 
In  these  cases  the  executive  naturally  hesi- 
tates to  reward  speed  and  volume  of  pro- 
duction, because  of  a  fear  that  his  loss  in 
waste  will  be  greater  than  his  gain  in  labor 
cost. 

In  such  cases  the  executive  will  find  "Qual- 
ity Piece  Work"  a  valuable  method. 

A  practical  case  will  illustrate  this  method. 


38  EXPERIENCES   IN   EFFICIENCY 

In  a  large  mill  an  important  operation  in- 
volved the  pasting  together  of  sheets  of  ma- 
terial. This  operation  developed  a  large  ten- 
dency toward  imperfections  of  various  kinds, 
not  only  those  arising  from  the  spoiling 
of  the  material  in  pasting,  but  others  due  to 
further  enlargement  of  defects  during  the 
drying  and  finishing  operations — defects 
which  careful  pasting  might  avoid.  The 
value  of  the  material  was  such  that  its  waste 
was  a  very  considerable  matter.  Quality  was 
the  most  important  element  to  be  considered. 

Even  on  the  day-work  plan,  it  was  the  cus- 
tom to  sort  over  the  material,  so  that  the  im- 
perfect sheets  were  eliminated  to  be  pasted 
separately.  The  pasting  gang,  therefore, 
started  with  presumably  perfect  stock,  of- 
fering a  fair  basis  for  waste-gauging. 

Starting  with  perfect  material,  there  were 
two  losses  to  guard  against.  The  first  was 
the  turning  of  perfect  sheets,  through  poor 
workmanship,  into  sheets  not  imperfect 
enough  for  waste,  but  so  defective  as  to  bring 
a  lower  selling  price.  The  second  waste  was 
that  absolute  one  where  only  a  scrap  value 
remained.  The  scheme  put  into  effect  must 
take  care  of  reward  for  speed,  but  a  reward 
so  proportioned  that  the  most  careful  and 


QUALITY   PIECE   WORK  39 

skilled  gang  obtained  a  large  return  for  good 
work,  while  poor  work  carried  penalties  in 
reduced  rewards  which  forced  out  poor  work- 
manship. 

The  detail  of  the  method  on  this  case  was 
as  follows.  A  standard  ratio  of  imperfect 
pasted  sheets  to  perfect  pasted,  sheets  was 
fixed,  as  well  as  a  standard  percentage  of 
total  waste.  These  standards  were,  of 
course,  the  result  of  records  and  experience. 

The  rate  was  based  primarily  on  the  per- 
centage of  imperfection. 

While  the  figures  given  below  are  not  ex- 
act, the  following  table  shows  in  a  general 
way  how  the  rates  look: 

$1.12  per  100  pastings  at  2%  per  cent  imperfect 

-i    -i  r\  ((  ((  ((    fy  ((         (C  (( 

L08        "  "         "  31/2    "      "          " 

-j  r\n          ((  ec  <e    A          (c       ((  (( 

l'.04        "  "         "  41/2    "      " 

1.00        "  "        "  5        "      "  " 

.98        "  "         "  5%    "      "  « 

(\n  ((  ((  «   £  <f        <f  tf 


QO          ((  <e  <t   iv 

.90        "  "         <c 


In  addition,  the  waste  is  set  at  1  per  cent, 
and  a  fixed  bonus  per  100  pounds  arranged 
for  every  1/10  per  cent  reduction,  or  a  deduc- 


40  EXPERIENCES   IN   EFFICIENCY 

tion  for  every  1/10  per  cent  increase  in  this 
amount  for  the  week. 

The  results  in  saving  to  the  company  in 
imperfect  and  waste,  and  the  weekly  increase 
of  production,  have  been  very  well  worth 
while  indeed,  and  the  employees  have  ben- 
efited 25  per  cent  to  50  per  cent  in  increase 
in  wages;  one  operator  indeed  for  some 
years  having  averaged  nearly  100  per  cent 
increase  over  the  old  rate.  The  judgment 
as  to  the  quality  of  the  sheets  pasted  lies  in 
the  hands  of  people  so  far  away  from  the 
pasters  that  there  can  be  no  question  of  its 
fairness  to  both  the  company  and  the  work- 
men. The  pasted  sheets  go  through  other 
operations  and  are  sorted  out  as  to  quality 
when  they  are  put  up  in  final  counted  pack- 
ages. 

This  example  has  been  given  in  some  de- 
tail in  order  to  make  clear  by  figures  the 
method  employed.  The  same  method  has 
proven  applicable  in  many  cases  where  judg- 
ment, carefulness,  and  attention  could  get 
more  of  an  article  out  of  a  given  quantity  of 
raw  material,  with  less  waste,  than  the  ordi- 
nary methods  of  supervision  and  labor  pay 
will  obtain,  and  it  has  been  especially  valu- 
able in  the  case  of  leather. 


QUALITY   PIECE   WORK  41 

The  three  elements  in  the  operation  of 
quality  piece  work  are: 

1. — To  find  operations  in  which  waste  is  to 
be  saved  or  quality  bettered  by  care. 

2. — To  find  by  observation  and  data  what 
can  be  done  per  hour  on  the  quantity  basis. 

3. — To  find  what  the  average  waste  or 
standard  quality  is  as  a  base  for  quality  rate. 

There  have  already  been  some  important 
developments  of  this  quality  piece  work  in 
several  factories.  It  can  be  applied  with 
careful  study  to  any  operation  where  waste 
is  to  be  saved  or  quality  bettered. 

Important  from  the  point  of  economy  as  a 
reduction  of  labor  unit  cost  may  be,  the 
struggle  for  speed  cannot  last  without  a  full 
accounting  with  quality,  and  the  betterment 
of  quality  and  saving  of  waste  will  take  its 
place  in  the  progress  of  the  world  as  a  good 
second  with  the  betterment  of  morals  and  so- 
cial practice,  and  indeed  has  an  effective 
place  in  their  progress.  Perhaps  the  next 
step  in  the  progress  of  increasing  per-hour 
production  in  manufacture  by  means  of  ex- 
tra wage  incentive  will  be  the  betterment  of 
quality  through  quality  piece  work. 


CHAPTER   IV 
GANG   PIECE   WORK 

work,  founded  on  the  ancient  busi- 
ness  principle  of  barter  and  trade,  of 
giving  a  stipulated  price  for  a  stipulated  ar- 
ticle, is  an  old  institution,  in  principle  and 
practice  well  known  of  both  capital  and  la- 
bor. And  while  there  rests  in  the  minds  of 
very  many  (whose  interests  would  be  much 
better  served  by  knowledge)  a  considerable 
ignorance  of  the  significance  of  differential 
rates,  premium  plans,  etc.,  every  manufac- 
turer knows  of  straight  piece  work,  and  most 
of  them  believe  that  their  factories  are 
operated  to  a  very  high  percentage  on  that 
method  of  payment. 

Yet  actual  experience  with  a  great  many 
manufacturing  plants  shows  that,  if  the  pay 
roll  is  consulted  week  after  week,  it  will  bear 
witness  in  the  average  plant  to  no  such  con- 
dition, but  will  usually  prove  that  in  the  sev- 
eral departments,  all  labor  considered,  there 

42 


GANG  PIECE  WORK  43 

is  from  10  per  cent  to  75  per  cent  piece  work, 
none  too  often  reading  up  to  the  higher  mark. 

It  is  true  that  manufacturers  are  begin- 
ning to  be  more  susceptible  to  the  call  of  in- 
creased labor-efficiency.  The  propagandists 
.  of  scientific  management  are  beginning  to  be 
listened  to  somewhat  more  respectfully,  as 
the  message  of  increased  efficiency  is  a  joy- 
ful one  to  the  ear  of  the  American  business 
man,  when  he  can  be  persuaded  that  it  ap- 
plies in  some  practical  way  to  his  particular 
case.  And  it  may  be  believed  that  the  agi- 
tation about  the  $1,000,000  a  day  loss  by  the 
railroads  will  do  more  than  any  recent  oc- 
currence to  urge  manufacturers  farther 
along  these  lines,  not  only  by  calling  the  mat- 
ter strongly  to  their  attention,  but  also  by 
that  happy  trick  of  our  human  natures  that 
makes  many  of  us  hasten,  sometimes  uncon- 
sciously, to  correct  or  improve  when  the 
fault  or  opportunity  is  shown  to  exist  in  an- 
other. 

But  that  manufacturer  who  desires  to  op- 
erate his  labor  on  piece  work  has  still,  on 
the  average,  a  definite  opportunity  of  ob- 
taining a  real  increased  efficiency  in  develop- 
ing this  method  of  payment  to  the  highest 
degree  by  getting  his  whole  factory  working 


44  EXPERIENCES    IN    EFFICIENCY 

on  this  plan.  It  is  not  impossible  in  many 
factories  to  get  almost  100  per  cent  of  the 
total  labor,  even  including  the  foremen  in 
most  departments,  on  piece  work.  To  accom- 
plish this,  however,  it  is  not  infrequently  nec- 
essary to  depart  from  that  method  of  piece 
work  whereby  a  fixed  rate  for  a  given  opera- 
tion on  a  given  article  is  paid  to  an  individ- 
ual, or  what  might  be  called  "individual 
piece  work." 

A  most  effective  method  of  departure  lies 
in  gang  piece  work. 

The  term  "gang  piece  work"  does  not  here 
signify  that  form  of  labor  payment  which  is 
not  now  in  as  great  practice  as  it  once  was, 
and  which  deserves  a  grave  in  the  cemetery 
of  discarded  methods,  viz.,  the  method  by 
which  work  is  farmed  out  for  a  given  sum, 
to  a  foreman  or  sub-contractor  working  gen- 
erally inside  the  plant,  who  in  turn  hires  and 
pays  his  own  labor  according  to  his  own 
ideas.  Such  a  method  holds  in  it  no  real 
economy  to  the  final  consumer,  but  leads  gen- 
erally to  tyranny,  insubordination,  poor 
work,  and  poorly  paid  (and  therefore  inef- 
ficient) help.  It  is,  indeed,  the  father  of  the 
sweat  shop. 

By  gang  piece  work  here  is  meant  some- 


GANG   PIECE   WORK  45 

thing  entirely  different.  It  is  a  plan  where- 
by the  manufacturer  still  pays  a  stipulated 
price  for  a  given  amount  of  work  to  a  gang 
— the  foreman  generally  included — but  the 
division  of  the  pay  is  made  by  the  manufac- 
turer himself  on  a  basis  of  fairness  to  all 
concerned,  each  individual  sharing  propor- 
tionally in  any  increase  of  gang  pay  earned, 
and  the  manufacturer  retaining  to  himself 
the  usual  prerogatives  of  hire,  discipline, 
and  discharge.  This  plan  is  not  new;  but  it 
is  not  practised  as  freely  as  it  should  be,  for 
it  has  distinct  advantages. 

Such  a  method  is  economically  valuable, 
especially  under  that  condition  where  the 
work  in  the  final  result  is  divisible  into  defi- 
nite units  performed  by  a  gang,  but  in  its 
progress  passes  through  the  hands  of  indi- 
viduals in  such  a  varying  and  changing 
method  as  to  be  practically  indivisible  into 
units  for  individual  piece-work  value.  The 
gang  becomes  the  contracting  individual ;  the 
final  result,  the  paid  for  operation. 

Let  us  take  a  definite  example  to  illus- 
trate : 

In  an  envelope  factory  there  works  a  gang 
of  eight  men  including  the  foreman.  The 
duties  of  the  individuals  are  somewhat  wide- 


46  EXPERIENCES   IN  EFFICIENCY 

ly  divided.  Two  men  are  cellarmen.  They 
unload  paper  from  the  cars  and  wagons,  take 
up  paper  on  order  to  the  envelope  machines, 
and  bale  the  waste  cuttings  as  they  come 
down  the  chute  from  the  envelope  cutters. 
Four  men,  including  the  foreman  who  also 
plans  and  lays  out  the  work,  cut  envelopes 
on  machines.  One  man  cuts  envelopes  of  odd 
sizes  by  hand,  and  the  eighth  member  of  the 
gang  is  a  boy  who  delivers  the  cut  envelopes 
from  the  cutters  to  the  envelope  machines. 
The  envelopes  are  of  all  possible  sizes  and 
quantities,  and  it  is  easy  to  imagine  that 
there  was  ample  basis  in  fact  for  the  predic- 
tions that  were  made  that  it  was  impossible 
to  put  this  work  on  piece  work  successfully, 
without  more  labor  in  working  out  the  rates 
on  the  more  than  1,000,000  cut  daily  than 
the  saving  would  be,  not  to  mention  the  dif- 
ficulties of  planning  the  work  so  that  each 
man  got  an  equal  share.  Gang  piece  work, 
however,  solved  the  situation  in  the  simplest 
way. 

A  rate  of  2  cents  per  1,000  envelopes  of 
any  size  for  the  whole  gang  of  eight  men  was 
arrived  at  by  careful  record  and  observa- 
tions, covering  all  kinds  and  sizes  of  en- 
velopes, and  the  weekly  amount  earned  is  di- 


GANG   PIECE   WORK  47 

vided  between  the  members  of  the  gang  on  a 
fixed  percentage  basis,  the  foreman  getting 
the  largest  and  the  boy  the  smallest  propor- 
tion. The  pay  roll  of  this  gang  is  arrived 
at  in  five  minutes  at  the  end  of  the  week; 
for,  take  note,  the  gang  is  paid  each  week, 
not  on  what  it  cuts  but  on  the  number  of 
thousand  shipped  out  of  the  factory.  This 
method  has,  first,  the  decided  advantage  that 
only  good  work  is  paid  for,  and  the  number 
is  beyond  the  question  of  dispute. 

In  this  case  gang  piece  work  has  worked 
most  excellently  to  the  advantage  both  of 
the  factory  and  the  men.  Production  has 
increased  largely,  and  so  has  the  pay  of  the 
men,  despite  the  decrease  in  cost. 

Gang  piece  work  developed  here  its  nat- 
ural tendency  toward  co-operation,  always 
the  great  force  toward  results.  While  it 
would  have  been  very  difficult,  if  not  impos- 
sible, to  have  made  individual  piece-work 
rates  for  the  different  operations  and  classes 
of  work,  it  would  have  been  much  more  dif- 
ficult, on  the  individual  piece-work  plan,  to 
have  divided  the  work  so  as  to  have  obtained 
satisfaction  with  each  man.  When  all  were 
in  the  same  boat,  however,  they  learned 
quickly  to  pull  together. 


48  EXPERIENCES   IN   EFFICIENCY 

Take  another  example — a  plating  room. 
Here  the  parts  of  varying  sizes,  weights,  and 
shapes  went  now  into  this  man's  hands,  now 
to  another's.  The  work  could  not  be  divided 
into  separate  operations  and  be  economically 
finished.  The  day-work  plan  was  the  only 
method  by  which  it  appeared  possible  to  do 
this  work.  Individual  piece  work,  as  any 
plating-room  foreman  will  acknowledge, 
where  the  operations  are  many  and  varied, 
seems  impossible.  Gang  piece  work,  how- 
ever, solved  the  problem.  Piece  rates  for  the 
finished  article  were  worked  out,  and  the 
gang  (including  the  foreman)  were  paid 
weekly  on  the  product  turned  out  by  the 
room,  the  piece  rates  varying  as  to  the  dif- 
ferent articles  and  the  total  amount  being 
divided  between  the  operatives  on  a  prear- 
ranged percentage  basis,  the  foreman  getting 
the  largest  percentage.  The  result  was  de- 
cided economy  to  the  plant  and  increased 
wages  for  the  operator. 

Many  more  examples  of  the  value  of  gang 
piece  work  where  individual  piece  work  is 
impossible  might  be  given,  but  there  is  also 
to  be  obtained  from  gang  piece  work  fre- 
quently a  value  where  individual  piece  work 
is  easily  possible.  Such  cases  arise  where 


GANG  PIECE  WORK  49 

the  policy  of  "each  man  for  himself  and  the 
devil  take  the  hindmost "  (which,  we  must 
confess,  individual  piece  work  has  some  ten- 
dency to  foster)  is  a  policy  that  leaves  the 
company  also  with  the  rear  guard. 

Here  the  value  of  the  co-operative  force 
of  gang  piece  work  becomes  very  apparent. 
Let  us  again  take  an  example. 

A  force  of  25  to  30  men  assemble  small 
parts  into  a  finished  whole.  There  are  a 
great  many  small  parts,  and  some  of  these 
have  to  be  assembled  and  passed  on  for  ad- 
justment with  other  parts  likewise  partly  as- 
sembled. Despite  careful  planning,  the  week- 
ly production  constantly  varied  and  an  ex- 
cess of  small  parts  was  constantly  demanded 
on  the  individual  piece-work  plan.  Each  man 
was  working  for  himself,  hoarding  parts 
whenever  possible,  frequently  stealing  them 
from  his  neighbor,  passing  on  partly  as- 
sembled parts  poorly  done,  demanding  con- 
stant inspection,  adjustment  of  disputes,  and 
not  a  little  confusion. 

Gang  piece  work  was  installed  and  the  sit- 
uation immediately  changed.  Production 
rose  to  a  fixed  maximum.  Inspection  was 
unnecessary  except  to  test  the  finished  arti- 
cle. There  was  a  decrease  in  parts  disap- 


50  EXPERIENCES    IN   EFFICIENCY 

pearing.  The  necessity  of  co-operation  for 
the  general  good,  the  broadening  of  the  scope 
of  the  individual  to  look  to  the  welfare  of  the 
whole  instead  of  his  own  solely,  had  in  this 
work  (as  it  has  in  any  other  affairs  of  the 
world,  political,  religious,  humanitarian)  an 
extremely  beneficial  effect  for  all  involved. 

In  fact,  gang  piece  work  seems  to  be  espe- 
cially adapted  for  results  where  numbers  of 
small  parts  are  involved,  when  these  parts 
have  to  pass  through  many  operators '  hands. 
This  same  plan  was  put  into  another  depart- 
ment of  the  same  plant,  where  certain  small 
parts  went  through  a  number  of  different 
kinds  of  operations  necessitating  that  one 
operative  should  pass  them  to  another.  On 
the  individual  piece-work  basis,  there  was 
considerable  delay  and  much  necessity  for 
special  rush  to  get  certain  needed  parts  out 
of  this  department,  despite  careful  routing. 
Unforeseen  delays  and  occurrences,  lack  of 
interest  on  the  part  of  each  individual  ex- 
cept in  his  own  work,  much  loss  of  labor  paid 
on  work  spoiled  before  it  reached  the  last 
operation,  beside  a  great  deal  of  calculation 
necessary  to  make  up  the  pay  roll,  were  dis- 
covered. 

Gang    piece    work    miraculously    stopped 


GANG  PIECE  WORK  51 

this.  The  gang,  paid  a  single  rate  on  good 
finished  parts,  quickly  discovered  ways  of 
getting  through  a  greater  proportion  of  good 
finished  parts  and  of  reducing  to  a  minimum 
the  time  of  routing. 

Co-operation — and  it  is  a  fact,  comment 
upon  it  as  you  will,  that  the  opportunity  for 
gain  will  bring  the  most  intelligent  co-opera- 
tion on  the  part  of  the  average  body  of  men 
when  properly  led — co-operation  educates. 
It  makes  common  to  the  gang  the  education 
and  skill  and  energy  of  each  man.  It  works 
towards  greater  efficiency  of  the  whole. 

To  establish  gang  piece  work  it  is  neces- 
sary, first : — to  find,  as  a  basis  for  rate  pay- 
ment, some  final  result  or  results  which  a 
gang  of  men  are  engaged  in  accomplishing; 
second — to  establish  a  definite  method  of  di- 
vision between  them  of  the  amount  earned  by 
the  gang,  this  being  based  generally  on  the 
relative  skill  and  position  of  the  men  in- 
volved. 

While  as  before  noted,  gang  piece  work 
is  not  a  new  institution,  it  is  one  that  in  most 
plants  has  never  been  utilized  to  its  most 
profitable  extent.  For  it  is  useful  both  in 
attaining  the  highest  percentage  of  piece- 
work efficiency  and  in  introducing  what  most 


52  EXPERIENCES   IN   EFFICIENCY 

concerns  stand  badly  in  need  of — co-opera- 
tion. And  if  it  be  from  the  point  of  view 
of  labor  itself,  since  it  demands  equal  wage 
for  all  of  a  class  and  decries  piece  work  part- 
ly because  of  its  discriminating  effect,  what 
could  more  justly  meet  its  views  and  still 
satisfy  the  employer  than  gang  piece  work? 
From  many  ethical  considerations,  it  is 
well  for  men  to  be  bound  together  for  a  com- 
mon cause  when  that  cause  is  a  fair  one,  and 
any  possible  advantage  that  such  a  com- 
bination in  a  manufacturing  plant  may  get 
because  its  demands  for  rates  and  privileges 
may  be  incited  by  the  cleverest  and  strong- 
est man  in  the  gang,  may  well  be  considered 
as  offset  by  the  fact  that  its  results,  the  en- 
ergy and  skill  of  its  workers,  are  likewise 
incited  by  the  same  force.  And  it  is  unde- 
niable that  this  form  of  payment  brings 
about  a  concerted  action  on  the  part  of  the 
gang,  which  while  it  may  not  replace  or  be 
as  effective  as  a  careful  and  intelligent  plan 
from  a  superior  executive  source,  is,  never- 
theless, a  good  abettor  of  such  a  plan  and 
assists  materially  when  there  is  no  such  plan. 


CHAPTER  V 
THE    PKOBLEM    OF    CLERICAL   LABOR 

TF  the  minds  of  many  executives,  in  these 
-*-  days  of  demand  for  efficiency,  could  be 
read,  perhaps  very  prominently  would  ap- 
pear this  advertisement: 

Wanted — More  efficiency  and  the  facts  to  base  it 
on,  without  increase  of  clerical  labor 

This  story  is  not  necessarily  a  universal 
answer  to  that  advertisement,  but  it  gives 
the  experience  in  one  plant  where  the  prob- 
lem was  met  in  a  successful  way. 

The  plant  in  question  employed  some  six 
hundred  people  in  the  manufacture  of  a  sta- 
ple article. 

It  had  a  department  of  costs  and  statis- 
tics in  which  some  eight  men  were  engaged. 
This  department  had  concentrated  in  it  all 
the  statistical  work  of  whatever  nature — cost, 
sales  analysis,  pay  rolls,  and  records  of  all 
kinds  outside  of  the  actual  bookkeeping. 

53 


54  EXPERIENCES   IN   EFFICIENCY 

This  concentration  in  itself  offered  an  ad- 
vantage, since  it  meant  the  least  duplica- 
tion of  facts  recorded,  and  the  most  ready 
at  hand  information  from  the  point  of  view 
of  economy  and  effectiveness.  And  this  is 
an  important  point. 

This  department  furnished  a  great  amount 
of  information,  but  there  came  a  time  when 
more  statistics  still  were  demanded,  and  it 
seemed  to  those  in  authority  in  the  depart- 
ment that  more  clerical  labor  was  necessary 
to  make  the  studies  and  produce  the  facts 
required.  But  the  executive  refused  to  ad- 
mit this  increase. 

And  so  developed  a  very  usual  situation. 

There  were  two  things  to  do — to  drop  the 
idea  of  further  statistical  work,  or  to  find  a 
means  to  get  the  eight  clerks  to  do  it.  To 
the  active  mind  this  is  no  situation  for  hesi- 
tation. There  was  to  be  found  a  way.  A 
study  of  the  conditions  was  therefore  decided 
upon. 

The  problem  was  considered  exactly  as 
would  have  been  the  same  problem  in  rela- 
tion to  eight  operators  or  producers  in  the 
factory.  Indeed,  here  is  a  mistake  made  by 
very  many,  working  towards  higher  effi- 
ciency, in  that  too  often  they  assume  that  the 


MAKING   CLERICAL   LABOR   EFFICIENT  55 

direct  producer  needs  the  most  painstaking 
study  and  watching,  and  that  through  him 
lies  the  only  road  to  savings.  This,  of  course, 
is  most  largely  true  because  of  the  greater 
number  of  direct  operators.  But  it  is  just 
as  true  of  the  indirect  operator,  commonly 
called  non-producer,  that  his  work  is  sus- 
ceptible of  study  and  change,  and  much  un- 
expected economy  can  be  made  through  this 
means. 

In  the  case  in  question  the  first  thing  done 
was  to  put  all  in  the  statistical  department 
on  the  time-note  system.  A  nomenclature 
was  devised  for  all  the  different  final  records 
being  collated  and  the  constituent  parts 
thereof.  Each  clerk  stated  on  his  time  note 
each  day,  in  minute  periods,  what  tasks  he 
performed,  and  how  long  it  took  him  to  do 
them,  following  of  course  the  nomenclature, 
so  that  there  might  be  no  mistake  in  inter- 
pretation later.  The  time  notes  were  simply 
a  recital,  on  one  daily  sheet,  at  what  hour 
and  minute  the  clerk  started  and  finished 
each  task  of  routine  or  given  work. 

This  at  first  was  met  with  a  not  entirely 
agreeable  humor.  The  clerk  is  very  little 
likely  to  take  the  view  that,  from  the  execu- 
tive down,  all  are  laborers  for  one  common 


56  EXPERIENCES   IN   EFFICIENCY 

cause,  and  alike  subject  to  methods  that  pro- 
mote the  good  of  the  business.  But  very 
shortly  the  clerks  fell  into  the  proper  spirit 
and  response. 

The  time  notes  were  daily  studied  by  the 
head  of  the  department,  with  the  result  that 
very  shortly  they  began  to  show  that  quick- 
ening of  effort  always  shown  when  a  worker 
is  conscious  that  his  record  is  under  scrutiny. 
In  the  course  of  a  fairly  short  time  it  be- 
came apparent  that  each  clerk  had  a  little 
more  time  on  his  hands  than  had  been  previ- 
ously supposed. 

From  the  time  notes  so  obtained  the  chief 
clerk  was  enabled  eventually  to  make  up  a 
schedule  of  how  long  it  ought  to  take  to  make 
up  the  whole  or  a  separate  part  of  any  given 
record  or  statistical  statement.  In  this,  of 
course,  he  was  assisted  by  his  personal  judg- 
ment of  the  work,  and  the  schedule  so  made 
was  quite  a  little  shorter  than  an  average 
of  the  times  taken  in  the  different  parts 
would  have  shown.  It  compared  favorably, 
however,  with  the  best  times  made. 

This,  of  course,  is  simply  following  the 
well  known  methods  of  efficiency  in  making 
a  time  study  and,  from  that,  a  plan.  It  is 


MAKING   CLERICAL   LABOR   EFFICIENT  57 

merely  an  application  a  little  unusual  though 
not  unnatural. 

In  the  course  of  this  study  changes  were 
naturally  made  in  the  office  and  desk  ar- 
rangements so  that  light  and  quiet  might  be 
best  attained. 

The  scheduled  time  for  each  record,  or 
part,  having  been  decided  upon,  an  arrange- 
ment of  the  records  was  made  in  a  daily, 
weekly,  and  monthly  schedule  for  each  man 
separately. 

This  schedule  for  each  man  was  made  up 
with  the  idea  of  giving  him  a  fairly  full  day's 
work,  and  with  that  arrangement  also  which 
correlated  his  work  so  that  he  got  the  most 
possible  to  do  along  certain  lines  of  work  in- 
volving a  like  understanding  and  the  use  of 
the  same  basic  records.  This  gave  a  se- 
quence to  each  clerk's  work  so  that  he  had 
some  idea  what  he  was  doing  and  took  a 
greater  interest  in  it.  He  was  naturally  able, 
therefore,  to  make  correlated  records  with 
more  facility. 

Now  in  this  work  it  developed  that,  once 
the  intent  was  understood,  the  intelligence  of 
the  men  asserted  itself.  They  were  naturally 
men  who  desired  and  expected  advancement. 


58  EXPERIENCES   IN   EFFICIENCY 

They  eventually  lent  every  aid  to  the  de- 
velopment of  the  study  and  plan. 

When  the  work  for  each  clerk  had  been 
scheduled,  it  was  written  out  on  a  card,  so 
arranged  that  the  first  column  contained  the 
names  of  the  records  or  parts  to  be  made,  the 
second  column  stating  what  time  (day,  week, 
or  month)  the  records  were  to  be  ready,  and, 
following  this,  thirty-one  columns  in  which 
each  clerk  must  check  (according  to  state- 
ment in  second  column  of  the  day  when  the 
records  were  to  be  finished)  the  fact  that 
they  were  finished.  These  cards  then  formed 
in  effect  the  regular  schedule  of  work  for 
each  man  and  an  up-to-date  record  of  how 
the  work  stood. 

Well,  this  must  be  all  very  simple  and 
plain.  But  it  was  very  effective.  In  the 
first  place,  it  absolutely  relieved  the  head 
of  the  cost  department  of  any  specific  work, 
since  all  records  were  scheduled  to  the 
others,  but  it  left  him  to  look  after  the  whole 
job,  to  study  the  statistics,  and  to  do  such 
separate  studies  of  costs  and  statistics  as 
seemed  from  time  to  time  necessary.  In  the 
second  place,  it  permitted  the  taking  up  and 
carrying  on  of  certain  statistical  work  for 
which  another  clerk  had  been  demanded,  thus 


MAKING   CLERICAL   LABOR  EFFICIENT  59 

making  a  saving  of  about  two  clerks'  time, 
seven  men  doing  what  would  have  formerly 
taken  nine  men. 

The  modus  operandi  as  thus  seen  was  sim- 
ple— the  time  study,  the  fixing  of  a  fair  aver- 
age time  for  record-making,  the  scheduling 
of  the  work  of  each  clerk  so  that  his  day's 
work  was  planned  for  him,  the  giving  to  each 
man  correlated  work,  the  schedule  card 
whereon  each  man  checked  up  himself  the 
fact  that  the  daily,  weekly,  or  monthly  rec- 
ord was,  or  was  not,  finished  on  schedule 
time. 

This  was  the  experience,  copyable  in  very 
many  plants,  no  doubt,  with  a  very  definite 
advantage.  But  back  of  all  these  experiences 
there  should  be  a  thorough  understanding 
and  belief  in  the  philosophy,  in  the  reasons 
and  fundamental  understanding. 

The  question  of  costs,  of  records,  of  sta- 
tistics, of  a  systematic  study  of  operations 
in  any  business,  necessarily  involves  a  con- 
stant investment  in  clerical  labor.  This  fact 
is  one  of  the  great  difficulties  in  the  way  of 
progress  of  efficiency;  for  clerical  labor  is 
the  most  feared  and  most  easily-dispensed- 
with  overhead  expense,  the  average  execu- 
tive being  more  inclined  to  trust  his  judg- 


60  EXPERIENCES   IN   EFFICIENCY 

ment  than  to  be  guided  by  the  facts  of 
statistics  where  the  clerical  cost  of  obtaining 
them  is  involved.  Yet  efficiency  can  result 
only  from,  and  be  maintained  only  by,  a  con- 
stant recording  and  studying  of  the  running 
facts  of  operation. 

The  average  executive,  if  pressed  to  a 
choice  in  the  expenditure  of  $1,000  between 
the  purchase  of  a  piece  of  machinery,  or  a 
year's  service  of  a  clerk,  would  ordinarily 
take  the  machinery.  That  is  tangible  and 
possessable  at  the  end  of  the  year.  The  ser- 
vice of  the  clerk  seems  evanescent.  The 
product  of  the  machinery  is  definite  and  sal- 
able. The  product  of  the  clerk  is  problem- 
atical, and  therein  lies  the  difficulty.  Yet 
it  is  not  improbable  in  very  many  plants — 
in  fact  it  is  daily  proving  so  over  and  over 
again — that  the  product  of  the  clerk,  through 
facts  brought  to  light  and  correlated,  may 
show  that  even  some  of  the  machinery  al- 
ready on  hand  can  be  discarded  and  increase 
of  product  obtained  from  what  is  left.  This 
is  one  of  the  commonest  things  it  does  show. 
It  may  show  losses  to  be  corrected,  wastes  to 
be  saved,  profit  possibilities  disregarded, 
leaks  to  be  stopped.  But  what  it  will  show 
is  a  matter  of  gamble  in  the  mind  of  the  ordi- 


MAKING   CLERICAL   LABOR  EFFICIENT  61 

nary  executive,  for  if  he  suspected  the  things 
clerical  labor  might  show  in  his  business  he 
would  correct  them  without  the  clerical  la- 
bor— or  thinks  he  would. 

Even  the  executive  who  has  had  some  ex- 
perience of  the  gains  to  be  made  still  hesi- 
tates to  invest  further  in  clerical  labor, 
doubting,  despite  some  happy  experience, 
whether  a  still  further  gain  sufficient  to  off- 
set the  expense  is  possible. 

Theoretically,  of  course,  every  business  en- 
tity deserves  thorough  study  throughout. 
Practically,  it  deserves  that  clerical  labor 
be  engaged  for  the  study  of  all  operations 
and  their  phases  where  it  appears  possible 
that  savings  commensurate  with  the  expendi- 
ture may  be  hidden,  with  the  reasonable  ex- 
pectation that  when  such  study  is  carried  on 
in  a  practical  and  economical  way,  the  ad- 
vantages actually  gained  in  some  operations 
will  more  than  offset  the  expenditure  with- 
out results  in  others. 

As  a  matter  of  fact,  the  average  executive 
goes  at  efficiency  attainment  a  good  deal  like 
a  boat  in  a  fog,  feeling  his  way  slowly  and 
making  a  good  deal  of  noise  about  it — which 
is  perfectly  natural,  and  just  as  it  should  be, 
provided  he  has  the  compass  of  confidence 


62  EXPERIENCES   IN   EFFICIENCY 

and  is  steering  knowingly  toward  the  port 
of  high  efficiency. 

From  the  point  of  view  of  the  average  ex- 
ecutive it  must  be  admitted  that  there  is 
something  irritating  in  the  persistency  of  the 
burden  of  clerical  labor ;  something  agitating 
in  the  constant  question  as  to  whether  it  is 
a  dead  weight  or  really  valuable.  It  seems 
non-productive  very  often,  and  even  when 
the  results  it  has  brought  about  have  been 
worth  while  in  the  past,  there  must  still  be 
the  question  as  to  whether  the  records  it 
keeps  piling  up  are  ever  again  to  be  valu- 
able. When  the  ordinarily  necessary  tasks, 
having  to  do  with  keeping  the  business  ma- 
chine smoothly  moving,  are  performed,  such 
as  bookkeeping,  putting  through  of  orders, 
etc.,  it  is  bound  to  be  a  question  as  to  how 
much  more  clerical  labor  is  profitable,  and 
no  effort  is  made  here  to  solve  this  question. 

Of  course,  the  methods  of  efficiency,  of  sci- 
entific management,  offer  some  definite  ad- 
vice on  this  point,  but  it  has  never  been 
shown  to  the  average  executive's  satisfac- 
tion that  there  is  any  sure  relation  between 
success  and  the  volume  of  clerical  labor. 

The  one  fair  gauge  of  this  problem,  to  be 
taken  only  over  a  reasonable  period  of  time, 


MAKING   CLERICAL   LABOR   EFFICIENT  63 

is  based  on  a  consideration  of  the  purpose  of 
clerical  labor.  Clerical  labor  is  employed 
specifically  to  facilitate  the  work  of  the  pro- 
ducer by  preparation  for  him,  and  to  econo- 
mize or  "  efficiencyize  "  it  by  study  and  rec- 
ords showing  the  relation  of  actual  cost  to 
standard.  It  must  be  very  apparent,  then, 
that  clerical  labor  is  spent  in  the  definite  ex- 
pectation of  saving  more  than  its  cost  in  the 
work  of  direct  producers.  Under  these  cir- 
cumstances, a  total  economy  by  clerical  labor 
is  made  when  the  total  index  figure  of  labor 
plus  expense  is  reduced.  Increasing  clerical 
labor  with  logic  is  merely  to  increase  ex- 
pense with  the  expectation  of  reducing  pro- 
ductive-labor unit-cost  more. 

This  is  of  course  merely  to  bring  again  to 
the  attention  that,  after  all,  labor  and  ex- 
pense as  cost  figures  cannot  be  considered 
separately.  Expense  is  the  tool  through 
which  labor  is  efficiently  handled,  and  that 
tool  is  rightly  bettered  and  made  more  ef- 
ficient and  effectivej  even  through  consid- 
erable expenditure,  so  long  as  it  reduces  cost 
per  unit  of  labor  more  than  it  increases  cost 
per  unit  of  expense.  Only  a  cost  system  will 
show  the  net  value  of  clerical  labor. 


64  EXPERIENCES   IN   EFFICIENCY 

It  is  fair  to  say,  however,  that  the  pre- 
ponderance of  experience  is  that  it  does  pay 
to  expend  clerical  labor  in  making  a  thor- 
ough record  study  of  manufacturing  opera- 
tions. The  average  case  (and  it  is  to  the 
average  case  that  most  methods  of  efficiency 
should  appeal)  is  that  of  the  executive  who 
is  making  some  study  of  his  operations, 
whose  clerical  labor  is  quite  a  material  and 
growing  expense,  and  who  has  obtained  re- 
sults which  encourage  him  to  further  effort 
but  yet  is  deterred  by  the  fear  of  the  burden 
of  clerical  labor.  To  this  one  this  study 
should  be  interesting  and  encouraging. 

The  reasons  for  the  results  obtained  in 
this  experience  were  simple,  for  a  regular 
order  or  schedule  or  planning  of  any  work 
productive  or  non-productive,  simple  or  com- 
plex, co-ordinated  or  not,  brings  better  re- 
sults with  human  nature.  Moreover,  an 
added  orderliness  and  interest  was  given. 
The  mere  fact  that  each  clerk  must  check 
himself  up  on  his  own  card,  and  be  ready  to 
present  it  on  demand,  in  itself  offered  a 
large  reason  for  efficiency  in  ambitious  young 
men. 

The  method  thus  outlined  will  readily  ap- 


MAKING   CLERICAL  LABOR  EFFICIENT  65 

ply  itself  to  any  intelligent  indirect  labor, 
no  matter  how  complex,  and  the  principles 
involve'd  are  applicable  in  all  indirect  labor 
and  will  be  found  efficiency-worthy. 


CHAPTER  VI 

•INCLUDING  THE  WHOLE  FORCE  IN  LABOR 
KEWARD 

l\/rOST  of  the  exploited  efficiency  methods 
-  *••  deal  with  the  human  element  in  pro- 
duction— labor.  This  is  not  because  labor 
cost  is  usually  the  largest  element  in  unit 
cost  (for  as  a  matter  of  fact  it  is  most  fre- 
quently the  smallest),  but  because  it  is  the 
most  elastic,  the  most  susceptible  to  im- 
provement, by  its  very  nature  yields  most 
readily  to  intelligent  effort ;  and  particularly 
because,  from  the  cost  point  of  view,  the  ele- 
ment of  expense  is  so  closely  knit  with  it, 
that  any  increase  in  production  per  time-unit 
carries  with  it  often  a  greater  decrease  in 
unit  cost  through  expense  reduction  than 
through  labor-cost  reduction. 

Of  course  little  argument  is  needed  to  clar- 
ify this  partiality  of  efficiency  schemes  for 
working  with  labor.  The  tendency  of  the 
other  two  elements  of  cost — material  and 

66 


PUTTING  EVERYBODY   ON   BONUS  67 

expense — is  to  resist  reduction  when  op- 
erated with  apart  from  labor. 

Material,  given  the  quality  and  design,  it 
is  true,  offers  some  definite  opportunity  of 
cost  reduction  in  most  plants  through  saving 
of  waste  and  recovery  of  by-product  values, 
but  not  continuously  so  in  any  large  per 
cent;  and  the  tendency  toward  increase  in 
cost  of  raw  material  seems  to  be  such  as  to 
overcome  such  savings  as  are  possible  in 
most  plants. 

Expense,  as  a  bulk,  both  by  the  studied 
increase  of  the  administrative  function  in 
the  attempt  to  increase  efficiency,  and  by  that 
counterpart  of  the  increasing  cost  of  living 
which  attaches  itself  to  business,  has  a  tre- 
mendous tendency  to  enlarge,  its  main  op- 
portunity of  reduction  being  in  lowering  the 
unit  cost  through  increase  of  production. 

Labor,  on  the  other  hand,  while  it  demands 
an  increasing  reward  in  a  bigger  weekly  pay 
envelope,  nevertheless,  through  its  intelli- 
gence and  will  power,  its  susceptibility  to 
training,  and  its  skill  in  the  use  of  machin- 
ery, possesses  an  unlimited  ability  to  in- 
crease its  productivity  or  daily  output.  It 
is  elemental,  then,  that  it  should  be  the  mark 
of  efficiency  methods. 


68  EXPERIENCES   IN   EFFICIENCY 

To  accomplish  the  increase  of  efficiency  of 
labor  there  are  three  main  bases  or  methods 
of  operation. 

The  first  and  oldest,  and  indeed  the  most 
effective,  is  the  substitution  of  machinery 
for  hand  work,  and  its  constant  improvement 
is  of  course  having  an  always  increasing  ef- 
fect. This  method,  as  far  as  management  is 
concerned,  has  to  do  mainly  with  capital. 

The  second  method  is  the  building  of  an 
executive  organization  to  assume,  to  the 
maximum,  all  the  functions  of  preparation 
up  to  the  final  direct  labor  operation,  so  that 
this  operation  shall  be  most  efficient.  This 
has  to  do  with  expense. 

The  third  method  is  the  rewarding  of  la- 
bor itself  in  some  fixed  proportion  to  its  at- 
tainment of  results  under  given  conditions  of 
operation. 

Probably  the  first  of  these  methods  will 
always  be  the  most  effective.  For  the  sec- 
ond there  have  been  devised  several  distinct 
plans  or  schemes,  that  of  scientific  manage- 
ment being  the  most  complete  in  theory,  and 
the  old  military  plan  by  far  the  most  prac- 
tised. 

For  the  third  method,  that  of  offering  in- 
centives to  labor,  there  have  been  advanced 


PUTTING   EVERYBODY   ON   BONUS  69 

some  fifteen  or  twenty  plans.  In  almost 
every  manufacturing  plant  some  of  these 
plans  are  in  use  (straight  piece  work  being 
the  most  popular),  for  this  third  method  is 
the  only  one  which  meets  labor 's  demand  for 
increased  pay  without  increasing  unit  labor 
cost,  or  indeed  with  a  decrease  in  that  cost. 

These  plans,  under  which  labor  may  be  in- 
duced by  a  reward  to  increase  its  output, 
have  nearly  all  been  explained  in  detail  with 
charts  showing  the  tendencies  of  labor  and 
expense  cost  under  their  operation,  and  it 
is  not  the  intent  of  this  article  to  discuss 
their  merits.  Time  study  and  motion  study, 
the  means  of  fixing  the  basis  of  reward,  have 
also  been  sufficiently  made  clear.  But  all 
these  methods  may  be  said  to  fall  short  in 
one  respect  not  entirely  unimportant — 
namely,  that  they  usually  reach  only  those 
performing  the  direct  and  more  simple  op- 
erations. It  may,  therefore,  be  interesting 
to  cite  the  experience  in  a  plant  where  all 
the  employees,  even  the  office  force,  were 
paid  on  the  incentive  basis. 

This  plant  manufactures  a  very  simple  ar- 
ticle, but  in  several  thousand  shapes  and 
grades  and  in  large  quantities,  so  that  it  is 
fair  to  say  of  it  at  the  start  that  its  product 


70  EXPERIENCES   IN   EFFICIENCY 

is  somewhat  exceptionally  susceptible  of 
being  placed  on  the  incentive  basis.  It  em- 
ployed some  two  hundred  operatives,  but  its 
business  was  growing  rapidly,  so  that  there 
was  an  ample  field  for  efficiency  work.  On 
the  other  hand  the  executive  had  already  for 
a  long  time  had  the  principal  and  simple 
operations  on  piece  work,  and  this  involved 
more  than  three-quarters  of  the  force.  These 
operatives  were  earning  what  was  consid- 
ered fair  pay,  but  were  not  increasing  their 
output,  having  arrived  at  that  point,  prob- 
ably, where  they  thought  it  to  their  advan- 
tage to  keep  the  amount  of  work  done  at 
about  the  level  it  had  reached,  for  fear  that 
the  rates  might  be  altered.  Certain  import- 
ant operations,  which  were  ' i  squeeze  points ' ' 
so  to  speak  (since  all  production  had  to  go 
through  them),  were  on  day  work,  thus  mak- 
ing it  difficult  to  get  through  them  more  than 
a  given  amount  of  work  except  at  the  ex- 
pense of  new  equipment.  Now  this  condition 
had  not  been  unsatisfactory,  and  indeed  was 
reasonably  profitable,  until  the  increasing 
business  began  to  crowd  the  situation,  de- 
manding either  increased  efficiency  or  in- 
creased equipment.  The  foremen  apparently 
had  been  "  energized  "  as  far  as  was  possible, 


PUTTING  EVERYBODY  ON  BONUS  71 

and  seemed  to  have  "  crowded "  the  opera- 
tives and  equipment  as  much  as  they  could. 
But  more  production  was  necessary  and  some 
action  had  to  be  taken. 

Now  this  is  not  an  uncommon  situation, 
even  in  very  well  operated  and  very  success- 
ful plants.  It  is  not  improbable  that  it  will 
persist  in  many  for  a  long  time  to  come,  sim- 
ply because  it  is  the  easiest  plan  on  which 
to,  operate,  viz.,  to  put  the  main  and  straight- 
forward operations  on  piece  work  and  to 
depend  on  organization  for  further  effort  in 
expansion  of  production.  And  it  is  not  to  be 
denied  that  this  is  found  a  very  satisfactory 
method.  But  it  is  to  be  said  of  every  manu- 
facturing situation,  no  matter  what  and 
where,  that  efficiency  holds  for  it,  now  or  in 
the  future,  a  plan  or  method  by  which  it  can 
be  improved,  no  matter  how  good  it  is — 
which  is  one  of  the  cheerful,  enticing,  and 
eternal  virtues  of  efficiency,  and  the  basis 
for  efficiency  engineering  as  a  profession. 

Many  experts  in  such  a  case  as  this,  where 
(despite  a  fair  efficiency  existing)  increasing 
demand  called  for  increasing  supply,  and  the 
main  equipment  was  not  to  be  increased, 
would  have  advised  the  introduction  of  some 
different  form  of  incentive  as  being  more 


72  EXPERIENCES   IN   EFFICIENCY 

encouraging  to  the  highest  attainment  of  ef- 
ficiency of  the  operatives  than  straight  piece 
work,  .and  this  might  have  had  some  good  ef- 
fect. But  there  were  elements  in  this  propo- 
sition (or  possibly  in  the  mind  of  the  execu- 
tive) whereby  it  was  determined  to  adhere 
to  the  plan  of  piece  work  in  practice.  This 
made  it  necessary,  then,  to  turn  to  that  part 
of  the  operative  force  and  organization  not 
working  on  the  piece-work  basis,  and  to  de- 
vise schemes  which  wpuld  make  the  organiza- 
tion in  part  and  whole  all  work  toward 
greater  production,  and  would  so  actuate  the 
installed  piece-work  plan  to  get  the  maxi- 
mum results. 

An  analysis  of  the  situation  showed,  then, 
that  its  weaknesses,  to  be  corrected  by  any 
efficiency  scheme,  must  be  strengthened 
along  the  following  lines:  the  organization 
must  have  a  reward  for  any  increased  re- 
sults; the  operations  where  work  was  most 
liable  to  be  held  up,  or  the  "squeeze  points," 
must  have  an  incentive  to  improve ;  and  some 
guarantee  must  be  offered  to  piece  workers 
to  increase  their  output.  This  meant  simply 
that  working  from  the  already  obtained 
standard  of  production,  all  concerned  must 


PUTTING   EVERYBODY    ON    BONUS  73 

obtain  an  increased  pay  for  an  increased  out- 
put with  the  same  equipment. 

Working  then  on  this  basis,  the  first  part 
"tackled"  was  the  work  where  the  principal 
"squeeze  point"  existed — the  point  where 
all  production  began,  since  it  had  to  do  with 
the  cutting  of  the  blanks.  There  had  always 
been  some  delay  caused  by  this  operation, 
and  it  had  never  been  put  on  piece  work  be- 
cause of  the  great  variety  of  the  size  and 
shapes,  and  the  quickness  with  which  even  a 
large  order  could  be  produced.  Moreover 
some  of  the  cutting  had  to  be  done  by  hand, 
and  much  of  it  was  done  by  the  foreman, 
and  there  were  only  five  men  employed  at 
the  work.  The  management  had  concluded 
that  on  account  of  the  small  number  of  op- 
eratives and  the  great  variety  of  sizes,  it 
would  cost  more  to  calculate  and  keep  track 
of  this  situation,  on  the  piece-work  basis, 
than  the  gain  over  the  day-work  basis  would 
warrant;  moreover  it  did  not  understand 
how  to  operate  the  rates  so  that  the  fore- 
man, who  worked  at  the  cutting  most  of  his 
time,  should  make  more  than  his  men,  or 
how  to  regulate  the  rates  of  the  hand  cut- 
ting. 

A     little     investigation,     however,     soon 


74  EXPERIENCES   IN   EFFICIENCY 

showed  that  there  were  two  other  elements 
to  this  operation  to  be  taken  into  account- 
namely,  the  prompt  supply  of  material  to  be 
cut,  and  the  removal  of  the  cut  pieces  and 
the  waste.  The  workers  doing  this  work 
were  therefore  included  in  the  gang  cred- 
ited to  this  operation.  But  to  put  this  op- 
eration on  piece  work  there  first  had  to  be 
found  a  fair  unit  of  production  for  payment. 
An  examination  of  the  records  of  ship- 
ment over  a  considerable  period  of  time 
showed  that  despite  the  great  variety  of 
parts,  there  actually  existed  a  somewhat  reg- 
ular proportion  of  the  main  sizes,  and  only 
a  reasonable  variation  per  week  in  the  total 
number  shipped.  Naturally,  then,  from 
these  facts  it  was  no  great  difficulty  to  bring 
forth  the  following  scheme.  A  rate  was  fixed 
per  1,000  pieces  shipped  per  week,  regard- 
less of  size.  This  rate  had  several  very 
patent  advantages  to  the  company.  It  paid 
only  for  pieces  shipped,  and  not  for  those 
spoiled  in  operation;  and  the  pay  for  the 
gang  was  easily  obtained  by  one  calculation 
at  the  end  of  the  week — total  number  shipped 
multiplied  by  rate.  The  regularity  of  ship- 
ment and  proportion  of  sizes  made  it  a  fair 
rate  as  to  these  two  points,  and  of  course 


PUTTING   EVERYBODY   ON   BONUS  75 

it  was  lower  than  the  day-work  cost.  The 
gang  among  whom  it  was  divided  on  a  week- 
ly percentage  basis  formed  by  hours  worked, 
on  a  percentage  arrangement  which  gave 
the  foreman  the  larger  share  and  the  un- 
skilled handlers  the  smaller,  consisted  of  the 
workers  who  brought  up  the  raw  material 
and  took  away  the  waste,  the  cutting  gang, 
and  those  who  removed  the  cut  pieces  and 
carried  them  to  the  forming  machines.  They 
worked  as  a  harmonious  unit  thereafter  with 
marked  results. 

This  same  general  scheme  was  put  into 
operation  on  the  only  other  set  of  operatives 
not  already  on  piece  work,  namely  the  store- 
keepers, labelers,  and  shippers.  These  were 
all  formed  into  one  gang  and  the  gang  slight- 
ly decreased,  the  day-rate  cost  being  de- 
creased in  a  slightly  less  ratio  as  a  piece- 
work rate.  The  operatives  were  now  all  on 
piece  work. 

The  second  proposition  taken  up  was 
to  make  increased  production  monetarily 
worth-while  to  the  foremen  and  superintend- 
ent, for  it  is  not  to  be  presumed  that  be- 
cause those  in  responsible  positions  are 
usually  paid  fixed  salaries,  they  are  not  sus- 
ceptible, and  as  reasonably  so,  to  the  lure 


76  EXPERIENCES    IN   EFFICIENCY 

of  the  incentive  as  the  general  line  of  op- 
eratives. 

To  accomplish  this  it  was  of  course  neces- 
sary to  fix  standards  of  production  per  op- 
erative for  each  department.  But  it  was 
likewise  necessary  to  fix  standards  of  ex- 
pense for  each  department,  since  it  was  plain 
that  otherwise  increases  might  be  obtained 
at  the  expense  of  the  company.  There  was 
eventually  arrived  at,  then,  for  each  depart- 
ment, a  standard  based  on  a  given  produc- 
tion per  week  per  operative,  and  a  given 
percentage  of  expense  to  productive  labor, 
the  foremen  to  get  an  increasing  bonus  as 
the  production  went  up  and  the  expense  ra- 
tio went  down.  It  must  again  be  confessed 
that  the  simple  nature  of  the  work  made 
this  an  easier  task  than  it  would  be  in  many 
plants,  but  it  is  not  on  that  account  less  pos- 
sible in  other  plants. 

The  superintendent  received  his  bonus  as 
a  percentage  on  the  foremen's  bonus. 

The  office  force  was  paid  on  the  increase 
of  shipments,  the  payment  for  any  extra  help 
to  come  out  of  the  bonus.  This  was  a  pay- 
ing proposition  for  the  company,  because 
the  bonus  paid  was  at  a  lower  cost  per  1,000 


PUTTING  EVERYBODY   ON   BONUS  77 

than  the  original  cost,  as  indeed  were  the 
bonuses  to  foremen  and  superintendent. 

It  was  now  arranged  that  all  the  opera- 
tives and  all  the  organization  had  an  interest 
in  the  increase  in  production  through  incen- 
tive. 

But  the  third  and  most  important  feature 
of  the  plan,  since  it  had  to  do  with  the  great- 
est number  of  operatives,  had  still  to  be  put 
into  operation  with  the  piece-work  plan,  viz., 
to  assure  all  that  no  fear  of  a  cut  need  be 
felt  no  matter  what  the  earnings.  This  was 
simply  accomplished  by  a  guarantee  on  the 
part  of  the  company  that  for  a  term  of  years 
no  change  would  be  made  in  the  rates. 

It  took  some  six  months  to  get  all  these 
plans  into  operation,  simple  as  they  were, 
and  it  must  be  acknowledged  that  the 
product  of  this  plant  in  its  uniformity  and 
the  possibility  of  expansion  through  the 
pressure  of  business  made  this  proposition 
rather  easier  of  comprehension  of  scheme 
and  carrying  out  of  plan  than  might  always 
be  the  case.  But  the  unification  of  the  in- 
terests of  all,  the  centralization  of  the  good 
of  each  in  the  good  of  all,  and  the  fact  that 
every  one,  no  matter  what  his  position, 
shared  in  the  forward  movement,  brought 


78  EXPERIENCES   IN   EFFICIENCY 

about  very  definite  results.  In  a  year,  with 
practically  the  same  force,  production  and 
shipments  had  advanced  over  20  per  cent, 
and  there  seemed  then  to  be  greater  leeway 
for  a  still  larger  output  than  had  existed  a 
year  previously. 

And  though  this  was  a  simple  case,  and 
worked  on  the  old  plan  of  piece  work,  it 
wound  up  by  being  at  least  somewhat  unique, 
in  that  it  included  successfully  the  whole 
force,  organization  and  all,  in  the  labor  re- 
ward. 


CHAPTER  VII 

PEODUCTION  LAEGELY  INCEEASED  BY 
SIMPLE    EEOEGANIZATION 

A  GREAT  struggle  takes  place  constantly 
•*^  in  nearly  every  American  manufac- 
turing plant  for  increase  of  production.  This 
is  not  the  result  of  natural  growth  alone,  but 
also  of  an  effort  based  on  the  economic  argu- 
ment that  the  greater  the  production  from 
a  given  plant,  the  lower  the  unit  cost,  and 
of  course  the  greater  the  profit.  And  so,  in 
a  healthy  factory,  a  friendly  rivalry  takes 
place  between  the  sales  force  and  the  fac- 
tory force — the  one  to  keep  the  plant  full 
of  orders,  the  other  to  increase  the  produc- 
tion. 

Such  a  rivalry  shortly  brings  the  plant  to 
that  condition  where,  at  least  in  some  depart- 
ments, its  capabilities  and  facilities  of  pro- 
duction seem  to  be  taxed  to  the  limit.  It 
becomes  then  a  necessity  either  to  build 
increased  facilities,  or  to  discover  some 

79 


80  EXPERIENCES   IN   EFFICIENCY 

method  of  increasing  its  capabilities  within 
the  facilities  it  possesses.  This  latter  ac- 
complishment is  frequently  attained  very 
satisfactorily  by  an  increase  of  efficiency. 

Now,  since  production  involves  nearly  all 
the  plant  forces,  material  and  human,  its  in- 
crease without  added  facility  is  not  always 
simple,  nor  brought  about  by  improvement 
in  one  direction  alone.  There  may  be  many 
weaknesses  of  operation,  but  it  has  been 
made  very  plain  in  a  great  many  cases  that 
inefficiency  (or,  let  us  say,  lack  of  highest 
efficiency  in  the  matter  of  production)  is 
nearly  always  a  fault  chargeable  to  the  plant 
organization,  and  not  to  the  producers.  And 
indeed  it  may  be  set  down  as  a  general  rule 
that  lack  of  efficiency  in  any  plant  is,  in  the 
main,  chargeable  to  the  executive  organiza- 
tion rather  than  to  the  workmen,  exception 
being  made  only  when  labor  organization  in- 
terferes, as  it  unfortunately  does  at  times, 
in  the  matter  of  restriction  of  output,  oppo- 
sition to  the  introduction  of  incentives,  and 
restriction  of  the  number  of  apprentices. 

An  apt  example  of  increase  of  production 
through  the  introduction  of  methods  of  ef- 
ficiency may  be  cited  in  the  case  of  the  water- 
hose  department  of  a  large  rubber-goods 


BETTERMENT   BY   SIMPLE   REORGANIZATION        81 

manufacturing  plant.  Some  idea  of  the  con- 
ditions of  this  department  before  the  said 
methods  were  introduced,  is  necessary  to 
make  plain  how  and  why  they  were  effective, 
and  it  may  be  said  that  these  conditions  are 
in  no  wise  exceptional  today  in  very  many 
manufacturing  plants. 

This,  then,  was  the  situation.  Orders  were 
received  daily  from  all  sources,  and  those 
items  belonging  to  the  water-hose  depart- 
ment were  neatly  typewritten  on  a  printed 
form,  with  necessary  specifications,  and  sent 
to  the  department  office,  where  the  foreman, 
assisted  by  a  clerk,  studied  them,  sorted 
them,  and,  according  to  his  best  judgment, 
ordered,  at  the  proper  time  from  another  de- 
partment, the  various  materials  of  which 
they  were  to  be  constructed.  When  these 
were  received  the  foreman  saw  to  it  that 
his  men  made  the  hose  in  a  workmanlike 
manner.  This  appeared  to  be  a  simple, 
straightforward,  and  indeed  a  usual  condi- 
tion; but  it  was  an  extremely  inefficient  one, 
not  a  little  because  of  the  following  condi- 
tions which  existed  in  relation  to  this  depart- 
ment: 

First:  The  department  upon  which  the 
hose  department  depended  for  its  materials 


82  EXPERIENCES   IN   EFFICIENCY 

of  construction,  was  receiving  just  as  im- 
portant orders  from  the  foremen  of  eight 
or  ten  other  departments  as  well.  These  calls 
were  all  independent  and  urgent ;  but  no  man 
can  serve  two  masters,  not  to  mention  eight 
to  ten,  in  a  busy  manufacturing  plant,  any 
more  than  he  can  outside  of  it.  The  result 
was,  plainly,  that  the  water-hose  department 
got  its  material  just  when  and  as  it  wanted 
it,  only  when  the  other  departments  were 
not  busy,  or  when  it  was  the  most  violently 
insistent. 

Second :  The  demand  for  water-hose,  espe- 
cially garden  hose,  is  seasonal,  and  depend- 
ent upon  the  action  of  nature.  The  ship- 
ments are  much  the  largest  in  spring  and 
early  summer,  and  of  course  production  is 
most  demanded  then. 

Third:  The  buyer  demands  generally 
some  mark  of  his  own  put  on  the  hose,  which 
can  be  done  only  in  the  course  of  manufac- 
ture, and  he  will  not  always  anticipate  his 
wants. 

Fourth:  Rubber  goods  deteriorate  some- 
what, and  so  cannot  be  manufactured  and 
piled  up  very  long  in  advance. 

This,  then,  was  the  state  of  affairs;  and 
the  net  result  was  that  during  the  busy  sea- 


BETTERMENT   BY   SIMPLE  REORGANIZATION        83 

son  there  was  piled  up  in  the  foreman's  of- 
fice a  sheaf  of  orders,  the  daily  production 
was  less  than  the  demand,  and  the  com- 
plaints, cancellations,  loss  of  present  and  fu- 
ture business  (to  which  were  added  the  con- 
stant investigations  and  comments  of  the 
management),  made  the  lives  of  the  foreman 
and  his  clerk,  during  the  busy  season,  uncom- 
fortable, to  say  the  least.  This  affected  the 
efficiency  of  the  department  still  more  un- 
favorably, for  highest  efficiency  is  neither  at- 
tained nor  maintained  under  conditions  of 
stress  of  mind  and  physical  effort,  but  with 
tranquil  minds  and  an  effort  reasonably 
within  the  elastic  limits  of  the  mental  and 
physical  nature. 

The  problem  here  was  to  get  the  maximum 
production  from  the  facilities  of  the  depart- 
ment, and  to  take  care  properly  of  a  demand 
that  was  greater  at  one  season  of  the  year 
than  another,  all  of  which,  when  properly 
done,  would,  of  course,  forestall  complaints 
and  bring  increased  shipments,  sales,  and 
profits,  not  to  speak  of  the  peace  of  mind  of 
all  concerned — a  rather  usual  factory  prob- 
lem. 

Now,  most  efficiencies  are  attained  by  di- 
rect operation  along  the  lines  of  definite 


84  EXPERIENCES   IN   EFFICIENCY 

principles.  The  seeker  after  efficiency  must 
know  something  of  these  principles,  and  they 
have  been  much  written  about,  if  not  well 
known  and  practiced  (for  executives  gen- 
erally are  not  great  readers  of  technical 
writings).  They  are  based  on  experience, 
experiment,  and  a  knowledge  of  human  ca- 
pabilities. 

The  principle,  or  principles,  that  deal  most 
directly  with  production  volume,  decree,  in 
plain  language,  that  there  shall  be  a  constant 
planning  of  work,  an  effective  preparation 
according  to  the  plans  before  the  work 
starts,  and  a  persistent  following  up  of  the 
plans  from  start  to  finish ;  and  that  the  tasks 
involved  under  such  a  scheme  shall  be  di- 
vided along  certain  lines  of  easiest  and  most 
effective  operation,  termed,  under  scientific 
management,  functional  organization.  And, 
indeed,  it  will  not  be  difficult  for  any  prac- 
tical man  to  believe  that  in  work  of  any 
complexity  or  changing  mass  of  detail,  it  is 
only  common  sense  when  maximum  results 
are  desired,  to  put  one  set  of  brains  and  en- 
ergy sorting  out  the  work  as  it  comes  in,  into 
classes,  grades,  lots,  and  planning  its  course 
through  the  factory  in  accordance  with  the 
previously  studied  facilities  and  capabili- 


BETTERMENT   BY   SIMPLE   REORGANIZATION        85 

ties;  another  set  of  brains  and  energy  fol- 
lowing the  details  of  these  plans;  and  the 
operations  themselves  under  still  another 
set  which  can  concentrate  thus  on  the  all- 
important  element  of  actual  performance 
where,  everything  prepared,  the  very  effi- 
ciency of  action  must  take  place.  For  the 
common  intention  and  the  common  sense  is 
that  the  organization  shall  be  planners  and 
preparers,  and  the  workmen  the  producers 
only;  but,  scientific  management  points  out, 
organization  has  never  been  properly  edu- 
cated to  do  its  full  share  of  the  work. 

After  all,  efficiency  is  largely  the  result  of 
educated  common  sense. 

Now,  working  on  this  principle  in  the  hose 
department,  a  little  analysis  soon  made  it 
evident  that  any  man  of  the  standard  which 
the  pay  would  cause  to  be  retained  (for  it  is 
a  fact  in  our  economic  arrangement  that  cer- 
tain positions  can  seldom  pay  more  than 
given  rates)  would  be  working  generally  just 
within  his  elastic  limit,  if  his  task  were  only 
to  handle  his  gang  in  such  a  way  as  to  get 
out  daily  the  standard  production.  And  so 
all  other  duties  were  taken  from  the  shoul- 
ders of  the  foreman  except  those  of  seeing 


86  EXPERIENCES   IN   EFFICIENCY 

to  it  that  his  men  did  this  daily  allotted 
work. 

To  discover  what  this  allotted  work  should 
be,  or  rather  the  standard  probable  daily 
production  of  the  department,  a  definite 
study  of  operations  was  made,  a  careful  ar- 
rangement of  benches  and  machinery  to  best 
permit  of  consecutive  progress  of  work  was 
determined,  and  proper  incentive  methods  to 
the  workmen  for  production  volume  were  es- 
tablished. The  department  was  then  ready 
to  do  its  part,  and  the  foreman  relieved  of 
all  clerical  work  to  see  that  it  was  done  as 
fast  as  the  orders  and  material  were  deliv- 
ered. 

But  following  the  principle  of  efficiency 
laid  down  in  the  matter  of  production 
volume,  the  main  solution  in  this  case  lay 
with  the  executive  organization.  There  was, 
first,  the  question  of  planning  to  be  dealt 
with;  and  a  planning  or  production  depart- 
ment, using  the  services  of  the  hose-depart- 
ment clerk,  was  started  in  the  factory  office. 
It  became  necessary  now,  since  the  foreman 
was  relieved  of  this  duty,  for  this  produc- 
tion clerk  to  lay  out  a  daily  stint  for  his  de- 
partment. To  do  this  in  any  different  way 
from  what  it  had  formerly  been  done,  it  be- 


BETTERMENT   BY   SIMPLE   REORGANIZATION        87 

came  immediately  evident  that,  for  intelli- 
gent action,  several  regular  bases  of  knowl- 
edge in  definite  statistics  must  be  laid,  for 
statistics  of  all  kinds  play  a  large  and  im- 
portant part  in  good  management.  Action 
should  be  based  on  facts. 

The  important  fact  for  the  production 
clerk  to  know  in  planning  was,  not  what  in- 
dividual customers  ordered,  but  what  the  or- 
ders totaled  by  grades.  So  there  was  made 
up  a  production  schedule  showing  just  how 
many  lengths  of  hose  of  each  size  and  grade 
were  needed  to  fill  all  orders,  and  this 
schedule  was  corrected  day  by  day  by  the  ad- 
dition of  new  orders  and  the  subtraction  of 
production.  Where  the  production  was  more 
than  the  quantity  needed  to  fill  shipping  or- 
ders, as  when  stock  orders  were  filled,  the 
balance  in  stock  was  shown  on  the  schedule 
in  a  circle,  so  that  in  case  new  orders  came 
in  for  this  article  the  production  clerk  would 
know  they  could  be  filled  from  the  shipping 
room — an  apparently  small  matter,  but 
really  important,  since  it  made  the  knowl- 
edge complete. 

With  this  schedule  in  hand,  the  mind  of  the 
production  clerk,  instead  of  being  agitated 
by  the  details  of  a  great  number  of  individ- 


88  EXPERIENCES   IN   EFFICIENCY 

ual  orders,  now  found  itself  suddenly  rising 
above  the  situation.  On  one  sheet  could  be 
seen  the  total  demands  on  the  department, 
and  with  the  new  knowledge  of  the  standard 
probable  daily  production  in  mind,  it  was 
very  readily  calculated  how  many  days '  work 
there  was  ahead,  and  the  day's  work  was 
laid  out  with  the  whole  situation  in  view, 
the  details  of  special  markings  being  sep- 
arately ordered. 

Now  the  great  step  had  been  taken  toward 
actual  efficiency,  when,  through  this  schedule, 
a  mental  ascent  was  made  so  that  the  situa- 
tion could  be  viewed  as  a  whole,  not  so  much 
in  the  handling  of  the  daily  situation  as  in 
looking  to  the  future,  since  in  factory  life,  as 
elsewhere,  the  preparation  for  the  future 
makes  the  present  more  effective.  For  the 
dusty  tomes  secreting  the  orders  and  ship- 
ments of  the  previous  year  were  hauled  out, 
and  their  conditions  likewise  scheduled  as  a 
guide  for  the  changing  conditions  and  the 
coming  busy  season. 

In  a  simple  way,  then,  there  had  been  sub- 
stituted a  certain  knowledge  instead  of  a 
despairing  wave  toward  a  mass  of  orders,  in 
answer  to  the  all-important  practical  ques- 
tion of  planning  production, — "What  has 


BETTERMENT   BY   SIMPLE   REORGANIZATION        89 

this  department  got  ahead  of  it  T '  With  this 
knowledge  the  magic  touch  of  efficiency  was 
made. 

So  far,  then,  two  important  points  had 
been  covered — the  foreman  was  relieved  and 
his  department  studied  and  arranged  to  get 
out  the  standard  daily  production,  and  the 
production  department  was  established  and 
a  proper  basis  for  planning  the  daily  work 
and  the  future  established,  and  the  planning 
begun. 

But  since  the  hose  department  could  get 
out  its  standard  production  quota  only  when 
it  was  supplied  promptly  with  its  material 
of  construction,  the  trick  was  not  yet  turned. 
It  became  necessary  that  the  production  de- 
partment, when  it  laid  out  a  daily  stint  for 
the  hose  department,  should  analyze  this 
stint  into  its  elements  of  construction,  and 
plan  its  progress  through  the  other  depart- 
ments several  days  ahead,  so  that  it  would 
arrive  on  time. 

Of  course,  it  must  be  plain,  then,  that  such 
a  plan,  when  persistently  put  through,  would 
simply  operate  to  the  advantage  of  the  hose 
department  as  against  all  other  departments, 
and  the  corollary  in  good  management  was 
that  all  other  departments  soon  came  under 


90  EXPERIENCES   IN   EFFICIENCY 

the  same  scheme,  and  gained  their  schedules 
and  their  place  in  the  production  department 
work. 

This  was  accomplished  in  much  the  same 
way  in  the  other  departments,  consistently 
with  their  peculiarities  of  manufacture,  as  it 
was  in  the  hose  department.  The  foremen 
were  relieved  of  all  responsibility  of  laying 
out  a  plan  of  work  or  order  fulfillment,  but 
were  simply  expected  to  see  that  their  men 
accomplished  the  work  planned  daily  for 
them  by  the  production  department.  The 
clerks  formerly  used  by  the  foremen,  when 
they  had  any,  were  put  into  the  production 
department.  Each  department  was  studied 
as  to  its  physical  arrangement  and  produc- 
tion possibilities,  and  desirable  changes 
made. 

Thus  there  was  established  a  central  pro- 
duction or  planning  department  with  no 
more  total  clerical  labor  than  was  formerly 
employed,  (since  in  some  cases  several 
smaller  departments  could  be  handled  by  one 
clerk),  and  to  this  department  came  daily 
all  orders.  From  it  issued  daily  to  each  de- 
partment the  orders  for  the  work  of  the  fol- 
lowing day,  and  to  the  preparation  depart- 
ments went  also  orders  for  material  looking 


BETTERMENT  BY  SIMPLE  REORGANIZATION    91 

forward  several  days  to  the  work  of  the  fin- 
ishing departments. 

Thus  instead  of  "each  department  for  it- 
self, "  their  interests  were  tied  together  and 
made  to  fit  in  with  each  other,  which  of 
course  made  for  harmony  and  increased  pro- 
duction for  all. 

A  good  method  once  firmly  introduced  into 
a  manufacturing  plant  travels  through  it 
faster  than  a  poor  one. 

Once  the  planning  was  under  way,  the  next 
essential  (and  a  very  difficult  one  to  get  un- 
der way  at  first)  was  to  make  sure  that  the 
plans  were  carried  out.  In  this  particular 
case  this  work  was  given  an  assistant  super- 
intendent, and  it  may  be  taken  for  granted 
that  no  easy  task  was  his.  He  was  asked  to 
institute  a  set  plan  in  place  of  the  long-used, 
independent  judgment  of  foremen  who  did 
not  even  desire  at  first  to  be  convinced  that 
a  production  clerk  could  do  as  well  as  they 
in  planning  what  should  be  done  in  their  de- 
partments. He  was  asked  to  institute  new 
ways  with  workmen  who  had  formed  habits 
of  their  own  in  their  operations.  He  was 
asked  to  meet  all  the  thousand-and-one  dif- 
ficulties, natural  and  unnatural,  that  sprang 
up  to  thwart  the  program.  Efficiency  de- 


92  EXPERIENCES    IN    EFFICIENCY 

mands  a  state  of  mind  in  predisposition 
toward  it,  not  in  opposition  to  it. 

But  gradually  the  situation  righted  itself. 
The  production  clerks  planned  the  plant  ca- 
pabilities; i.e.,  they  learned  what  combina- 
tions of  materials  and  articles  could  best  be 
put  through.  The  foremen  learned  that  the 
new  ways  produced  more  goods  with  less  la- 
bor to  them,  and  praise  instead  of  blame  be- 
came their  share  of  the  new  order  of  things. 
The  workmen  learned  that  to  obey  orders 
strictly  meant  to  make  higher  wages  through 
greater  production. 

Efficiency  had  arrived.  The  department 
standard  production  fixed,  the  foreman  re- 
lieved of  all  duties  except  to  operate  through 
his  gang,  the  orders  scheduled,  and  a  view 
given  of  the  total  necessities  of  the  present 
and  future  with  the  schedule  of  the  previous 
year  as  a  guide,  the  daily  work  planned  back 
to  the  origin  of  raw  material,  and  intelligent 
effort  made  to  see  that  the  plans  were  car- 
ried out — the  hose  department's  capabilities 
with  its  old  facilities  were  found  to  be  very 
materially  larger  than  were  suspected.  Its 
production  rapidly  increased.  The  wages  of 
the  workmen  increased  with  the  production. 
Customers  were  satisfied.  Orders  flowed  in 


BETTERMENT  BY   SIMPLE   REORGANIZATION        93 

more  freely.  Work  became  a  pleasure.  Ordi- 
nary intelligent  vigilance, — always  an  abso- 
lute essential  in  the  life  of  efficiency, — alone 
became  the  necessary  element  to  the  continu- 
ation of  a  vastly  improved  situation  in  pro- 
duction increase,  lower  cost,  and  greater 
profit.  So  production  volume  was  really 
merely  a  matter  of  organization. 


CHAPTER  VIII 
REDUCING   THE    FACTORY   EXPENSE 

TN  considering  modern  theories  and  prac- 
•^  tices  of  management  one  fact  which  has 
always  given  pause  to  the  average  executive, 
and  has  been  a  decided  deterrent  to  the  more 
rapid  introduction  of  methods  of  efficiency, 
is  that  they  appear  to  increase  that  element 
so  difficult  to  control  in  cost — expense.  In- 
deed, the  more  prominent  theories  teach  the 
necessity,  generally,  of  deliberately  increas- 
ing certain  items  of  expense,  of  materially 
enlarging,  for  example,  the  ratio  of  non-pro- 
ducers to  producers. 

The  logic  of  the  efficiency  experts  is  plain, 
of  course.  They  argue  that  it  is  only  the 
part  of  wisdom  to  add  sufficient  expense  to 
gather  statistical  facts  as  a  basis  of  action, 
since  these  facts  will  bring  greater  econo- 
mies through  wise  guidance;  that  it  is  only 
economic  common-sense  to  create  expense  in 
organization  to  plan  for,  to  prepare  the  work 

94 


REDUCING  FACTORY  EXPENSE         95 

for,  and  to  train  and  assist,  operatives,  since 
thereby  greater  efficiency  may  be  attained, 
bringing  about  total  cost  reduction ;  and  that 
increased  expense,  in  physical  arrangement 
and  preparation,  finds  its  ample  offset  in  in- 
creased production.  And  there  can  be  no 
doubt  as  to  the  truth  of  these  theories  if  their 
introduction  is  made  along  practical  lines. 

But  on  the  other  hand,  the  executive  has 
very  naturally  certain  definite  points  of  view 
gained  through  his  experience,  and  urged  by 
the  burden  of  his  responsibilities.  He  sees 
the  increase  of  expense  constantly  encroach- 
ing on  his  profits.  He  is  handling  his  labor 
and  material  within  his  best  knowledge  and 
ability,  and  ordinary  human  nature  does  not 
readily  permit  him  to  believe  it  can  be  much 
better  handled  in  his  particular  case.  And 
a  somewhat  natural  inertia  of  the  busy  ex- 
ecutive in  the  matter  of  radical  changes  is 
not  easily  overcome,  when  the  force  used  in- 
volves an  increase  of  that  bugaboo  to  prog- 
ress— expense. 

For  it  is  true  that  despite  all  struggles  to 
the  contrary,  expense,  both  in  its  total  and 
in  its  ratio  in  the  cost  of  the  production  unit, 
has  a  tendency  to  increase.  The  experts  ad- 
mit this,  and  advise  therefore  that  the  ex- 


96  EXPERIENCES   IN   EFFICIENCY 

ecutive  swim  with  the  tide,  and  increase  his 
expense  intelligently  and  scientifically,  in  or- 
der to  save  greater  amounts  through  the 
other  elements  of  cost — labor  and  material; 
and  the  wise  executive  may  certainly  lend 
an  attentive  ear  to  be  shown  whether  this  is 
probable. 

But  after  all,  by  the  very  nature  of  his  re- 
sponsibility, the  mind  of  every  executive  will 
hark  back  to  the  problem  of  reducing  ex- 
pense, and  perhaps  therefore  some  may  find 
an  interest  in  a  successful  experiment, 
wherein  both  the  total  amount  of  expense 
and  its  percentage  relation  to  production 
unit  cost  were  reduced  without  detriment  to 
general  efficiency. 

This  experiment  was  conducted  in  a  large 
factory  employing  about  1,200  hands,  and 
manufacturing  large  quantities  and  varieties 
of  a  small  mechanism.  This  mechanism  con- 
sisted of  some  one-hundred  parts — iron, 
steel,  brass,  and  wood.  The  plant  was  di- 
vided into  about  thirty  departments,  produc- 
tive (preparatory  and  assembling),  and  non- 
productive, and  the  volume  of  expense,  as 
separate  from  labor  and  material,  ran  un- 
comfortably well  up  into  six  figures  per  year. 

This  plant  had  grown  from  a  small  one  to 


REDUCING  FACTORY  EXPENSE         97 

a  large  one  with  many  years  of  success ;  but 
a  few  years  of  falling  off  in  sales  when  it  had 
reached  its  zenith,  while  in  no  sense  endan- 
gering its  existence,  yet  made  its  bulk  seem 
a  little  unwieldy.  And  at  the  psychological 
moment,  there  entered  the  combination  of  a 
new  element  into  the  management,  a  determi- 
nation to  revamp  the  methods  of  the  plant, 
and  an  expert. 

Of  course  this  forecast  eventually  the  do- 
ing of  many  things,  but  only  one  of  these — 
the  attempt  at  expense  reduction — is  of  pres- 
ent interest.  And  it  is  by  no  means  unusual 
or  strange  that  it  takes  some  such  event  as 
occurred  at  this  plant,  to  make  many  con- 
cerns conscientiously  study  their  expenses. 
Yet  efficiency  teaches  study  and  comparison 
of  expense  as  a  constant  practice. 

Now  in  the  consideration  of  any  applica- 
tion of  efficiency  to  a  given  situation,  it  is 
always  wise  to  study  and  analyze  the  existing 
conditions,  to  consider  the  method  and  reason 
of  its  existence,  and  the  nature  and  value  of 
its  application. 

This  is  especially  so  of  expense.  For  ex- 
pense is  not  directly  a  producer.  It  is  very 
plain  that  a  given  amount  of  material,  vary- 
ing as  the  waste  per  cent,  is  essential  in  the 


98  EXPERIENCES   IN   EFFICIENCY 

manufacture  of  a  given  article.  Labor  of 
course  must  be  used  to  shape  it.  These  may 
not  vary  much  in  given  countries  and  under 
given  conditions.  They  have  a  direct  appli- 
cation, generally  the  straightforward  opera- 
tion of  one  mind  working  from  a  plan,  or 
according  to  a  general  practice,  and  espe- 
cially in  staple  articles,  are  readily  suscepti- 
ble to  standardization. 

But  expense  has  only  an  indirect,  even  if 
important,  bearing  on  the  manufactured  ar- 
ticle. In  theory  it  is  the  tool  of  the  execu- 
tive, with  which  he  operates  his  labor  and 
material  to  produce  the  salable  article,  and 
it  varies  materially  with  the  ability  and  plan 
of  operation  of  each  executive.  It  is  the 
channel  through  which  one  man,  or  group  of 
men,  put  into  operation  their  plans  and  or- 
ders, controlling  large  production.  Its  sole 
reason  of  existence  is  to  forward,  improve, 
and  quicken  the  work  of  the  producer.  It 
furnishes  machinery,  power  to  operate  it, 
and  keeps  it  in  repair.  It  purchases  mate- 
rial, cares  for  it,  transports  it.  It  obtains 
orders,  transmits  them,  makes  records  of 
their  cost  and  progress,  and  makes  shipment. 
It  supplies  light,  heat,  and  comfort.  It  fur- 
nishes a  guiding  organization  to  command, 


REDUCING  FACTORY  EXPENSE         99 

instruct,  and  reward  the  acts  of  labor.  It 
creates  and  maintains  channels  of  exchange. 
It  starts,  guides,  assists,  and  disposes  of 
production.  And  from  this  enumeration  it 
is  not  difficult  to  imagine  what  wide  varia- 
tions varying  abilities  and  conditions  bring 
about  in  expense. 

In  primitive  industry  almost  negligible,  it 
has  grown  with  industrial  civilization  and 
concentration  of  production  to  be  a  tremen- 
dous factor,  being  frequently  one-half  of  the 
total  cost. 

Its  theory  is  essentially  beneficent.  Every 
original  expense  and  every  addition,  in  the- 
ory is  presumed  to  be,  and  should  be,  de- 
signed to  make  labor  efficiency  increase  in 
larger  return.  And  of  course  expense  is 
natural  and  necessary  under  our  industrial 
regime. 

But  in  practice  it  has  become  a  bugabco. 
It  is  called  a  " burden",  and  many  execu- 
tives sweat  under  it;  or  it  is  spoken  of  as 
"  overhead ",  as  if  it  might  occasionally  fall 
and  bring  down  the  structure,  as  indeed  it 
sometimes  does.  The  method  of  its  upbuild- 
ing is  varied  and  occasional,  and  plans  of 
actual  organization  and  operation  vary 


100  EXPERIENCES   IN   EFFICIENCY 

very  considerably.  Standardization  has  not 
found  in  its  practice  any  large  use. 

Too  frequently  an  addition  to  it  is  made, 
especially  in  larger  plants,  on  the  foreman's 
"I  need"  or  "if  I  had",  without  sufficient 
consideration  of  the  truth  of  the  position 
taken.  Too  often,  indeed,  the  foremen,  or 
even  workmen,  are  permitted  to  undertake 
additions  to  the  expense  account  without 
consultation  with  higher  authority.  The 
fact,  in  practice,  therefore  is  that  frequently 
the  structure  of  expense  is  the  result  of  the 
plans  of  many  architects  incapable  by  experi- 
ence or  unripe  of  judgment.  The  old  prov- 
erb "Too  many  cooks  spoil  the  broth"  is 
very  pat  to  the  expense  accounts  of  many 
plants.  Or  it  frequently  happens  that  cer- 
tain expenses,  built  up  properly  to  meet 
given  conditions,  as  of  rush  or  increased 
business,  are  not  altered  when  these  condi- 
tions change. 

Of  course  it  is  also  true  that  much  expense 
is  contracted  with  the  idea  of  preparing  for 
an  expansion  of  business  or  an  economy 
which  does  not  eventuate.  This  is  frequently 
a  necessary  "gamble",  in  which  even  very 
experienced  and  successful  business  men 
lose,  and  about  the  only  comment  that  can  be 


REDUCING  FACTORY   EXPENSE  101 

made  as  to  it,  is  that  a  recession  from  it 
should  be  made  as  soon  as  failure  of  expan- 
sion or  economy  seems  certain. 

With  this  understanding  in  mind,  it  is  plain 
that  there  are  two  important  elements  in 
expense  consideration — (1),  the  theory  of  its 
plan  of  operation;  and  (2),  study  and  watch- 
fulness in  the  economic  practice  and  carry- 
ing out  of  that  plan. 

In  the  case  in  question,  then,  this  realiza- 
tion of  the  theoretical  and  practical  nature 
of  expense  was  glimpsed,  and  it  was  deter- 
mined that  possibilities  of  improvement  lay 
in  the  second  direction,  because  it  became 
evident  that  the  expense  of  this  plant  had 
not  been  a  miscellaneous  growth,  and  had 
not  received  the  close  study  it  deserved. 
The  plan  in  use  (namely,  that  of  a  sequence 
of  executives  down  to  the  foreman,  or  the 
military  plan  usually  adopted  in  manufac- 
turing plants)  was  not  seriously  altered,  ex- 
cept in  the  addition  of  a  cost  department,  an 
inspection  force,  and  a  production  depart- 
ment responsible  for  laying  out,  balancing, 
and  following  through  production.  This  is 
not  at  all  to  say  that  the  plan  used  is  the 
best  one,  for  this  is  only  a  story  of  how  a 
given  expense  was  reduced.  And  of  course 


EXPERIENCES   IN   EFFICIENCY 

it  is  not  to  be  understood  that  this  case,  of- 
fered as  it  is  as  a  typical  case  of  what  can  be 
done  in  many  plants,  is  intended  to  contro- 
vert the  theories  of  the  experts  that  it  pays 
to  increase  certain  expenses.  For  even 
while  expense  as  a  whole  was  being  reduced 
here,  certain  organization  expenses  were  in- 
creased. 

But  one  does  not  pull  down  a  structure 
without  studying  its  detail  of  construction, 
especially  if  in  its  place  is  to  be  reared  an- 
other, and  all  the  while  "business  is  still  go- 
ing on  at  the  old  stand  during  alterations ". 
It  was  necessary  first,  then,  to  make  a  study 
of  the  expense,  and  its  relation  to  the  run- 
ning production. 

This  brought  into  existence  the  expense 
analysis.  This  expense  analysis  was  the 
necessary  concomitant  of  the  cost  system, 
which  was  first  introduced.  Its  method  and 
plan  (see  Chapter  6,  Cost  Eeports  for  Execu- 
tives * )  were  devised  to  give  a  comparative 
monthly  detailed  picture  of  the  various 
items  of  expense  in  each  department  of  the 
plant,  productive  and  non-productive,  so  that 
each  item  should  tell  its  story  without  fur- 

*  Cost  Reports  for  Executives.     By  Benj.  A.  Franklin. 
The  Engineering  Magazine  Co.,  New  York,  1913. 


REDUCING   FACTORY    EXPENSE  103 

ther  analysis,  so  that  all  items  pertaining  to 
the  department,  direct  and  indirect,  should 
be  portrayed,  and  so  that  finally  the  relation 
of  the  total  expense  to  the  productive  hours 
of  the  department,  i.  e.,  the  expense  cost  per 
productive  hour,  should  be  shown. 

In  form  (see  Forms  13  to  19,  Cost  Eeports 
for  Executives  *)  it  was  for  each  department 
a  recital  month  after  month,  in  parallel  col- 
umns, of  the  details  of  the  expenses  of  the 
department,  set  down  one  below  the  other, 
but  in  related  groups,  the  figures  for  the 
same  item  appearing  always  in  the  same 
horizontal  line.  In  addition  to  these  parallel 
detailed  columns  of  monthly  expense,  there 
were  likewise  interplaced  each  month  col- 
umns showing  the  totals  of  each  item  to  date 
from  a  given  date,  and  a  monthly  and  period 
indicative  figure,  showing  at  a  glance  the 
running  cost  per  hour  of  expense  for  the 
month  and  period. 

Now  it  may  take  a  little  imagination  to 
see  this  expense  analysis,  but  once  seen  its 
mission  and  value  are  plain.  For  the  in- 
dicative hour-cost  figure  shows,  monthly, 
whether  the  expense  cost  is  increasing  or  de- 

*  Cost  Eeports  for  Executives.  By  Benj.  A.  Franklin. 
The  Engineering  Magazine  Co.,  New  York,  1913. 


104  EXPERIENCES   IN   EFFICIENCY 

creasing,  whether  an  effort  toward  economy 
in  expense  is  being  effective  or  not ;  and  any 
and  all  items,  such  as  the  use  of  supplies, 
non-productive  labor  under  different  head- 
ings, repairs,  and  other  details,  may  be  fol- 
lowed and  compared  month  after  month, 
their  value  in  the  progress  of  production 
studied,  their  relation  to  production  under- 
stood, and  the  result  of  any  attempt  at  their 
reduction  observed  immediately. 

And  it  was  not  difficult  to  see  in  the  con- 
crete; for  with  thirty  departments,  beside 
some  divisions  of  them,  and  odd  items,  such 
as  shipping,  etc.,  this  analysis  filled  a  loose- 
leaf  book  of  some  forty  pages  or  so,  and  took 
about  one-fourth  of  the  time  of  a  clerk  each 
month  to  make  it  up  from  the  books. 

Of  course  it  will  be  understood  that  when 
expense  is  dealt  with  here,  it  covers  every 
expenditure  made  by  the  plant,  with  the  ex- 
ception of  the  material  which  went  into  the 
salable  article  and  the  labor  which  actually 
shaped  it  into  its  salable  form.  Expense 
then  included  supplies  of  all  kinds,  tools,  re- 
pairs, power-cost,  non-productive  labor  of 
every  nature,  inspection,  office  force,  selling 
force,  and  all  miscellaneous  and  general  items 


REDUCING   FACTORY   EXPENSE  105 

not  properly  specifiable  under  the  heads  of 
material  and  labor  as  described. 

The  new  executive,  eager  then  to  econo- 
mize, and  the  expense  analysis  in  operation 
long  enough  (two  or  three  months)  to  be 
telling  a  fair  and  average  story  of  expense 
in  its  relation  to  the  progress  of  production, 
the  study  of  reduction  was  undertaken  vig- 
orously. 

There  has  been  so  much  exploitation  of 
efficiency  in  a  somewhat  sensational  way 
from  the  days  of  the  fight  before  the  Inter- 
state Commerce  Commission  against  higher 
freight  rates,  and  possibly  even  before,  that 
the  everyday  reader  is  likely  to  get  the  idea 
that  it  is  some  sort  of  secret  subtle  ability 
or  power  possessed  by  those  who  practice 
as  experts,  by  which,  while  a  gaping  execu- 
tive force  looks  on,  shop  conditions  are 
transformed  to  produce  unheard-of  results, 
as  if  the  experts  were  the  medicine  men  of 
the  industrial  tribes.  Of  course  scientific 
management,  efficiency,  call  the  movement 
what  you  will,  is  purely  a  set  of  principles 
and  rules,  and  of  methods  based  on  them, 
which,  when  applied  to  particular  cases  by 
experienced  men,  with  common  sense  and 
persevering  co-operation  of  those  concerned, 


106  EXPERIENCES   IN   EFFICIENCY 

are  capable  of  rendering  marked  results. 
And  these  results,  when  strongly  contrasted 
with  previous  conditions,  with  the  machinery 
of  alteration  lightly  touched  upon,  and  the 
operator  well  brought  out  as  the  deus  ex 
machina,  certainly  present  attractive  fea- 
tures. The  efficiency  expert  is  doing  a  great 
work.  He  is  doing  it  because  he  is  operating 
on  the  known  principles  and  methods,  guided 
by  his  wide  experiences  in  them.  But  every- 
where in  manufacturing  plants,  without  the 
conscious  knowledge  of  these  principles,  and 
before  they  were  enunciated  or  bruited 
abroad,  common-sensed  executives  were  and 
are  still  making  changes  which  bring  marked 
beneficial  results.  It  was  through  this  work 
that  the  principles  and  methods  of  efficiency 
were  developed  and  brought  to  the  front; 
and  more  and  more,  the  executive  is  learning 
and  using  the  principles  of  efficiency  him- 
self, for  they  were  enunciated  for  his  use 
and  guidance. 

It  ought  to  be  enough  for  efficiency,  then, 
as  a  modern  movement,  if  it  be  said  of  it 
that  it  has  its  place  with  the  many  other  ad- 
vanced movements,  scientific  and  philosophi- 
cal yet  practical,  of  the  last  several  decades. 

Certainly  in  this  case  of  expense,  reduc- 


REDUCING  FACTORY  EXPENSE        107 

tion  there  was  nothing  sensational.  It  was 
brought  about  through  hard  work,  by  con- 
stant consultations  of  three  or  four  men  who 
were  frequently  gathered  together  (perhaps 
not  always  prayerfully)  with  the  expense  an- 
alysis in  hand,  and  who  dissected  it,  dis- 
cussed item  after  item  of  expense  in  each 
department,  studied  the  needs  and  necessi- 
ties, and  decided  upon  definite  changes  or 
experiments,  after  further  discussing  them 
frankly  with  the  foremen  of  the  departments. 
And  this  method  must  essentially  underlie 
any  economic  consideration  of  expense  from 
the  point  of  reduction.  While  many  definite 
schemes,  and  logical  ones,  are  offered  for  in- 
creasing expense,  no  one  has  yet  come  for- 
ward with  any  systematic  plan  (other  than 
that  offered  here)  for  reducing  it,  despite 
the  eagerness  with  which  the  business  world 
awaits  it.  Such  plans  are  still  in  the  class 
with  the  non-refillable  bottle,  the  non-pneu- 
matic tube,  and  (shall  we  say!)  perpetual 
motion. 

One  of  the  first  items  demanding  economy 
application  in  the  given  case  was  the  use  of 
general  supplies.  Supplies  in  every  plant 
seem  to  offer  a  great  opportunity  for  waste. 
There  appears  to  be  no  definite  relation  be- 


108  EXPERIENCES   IN   EFFICIENCY 

tween  their  cost  and  production  cost  in  the 
minds  of  operatives  generally;  and  it  is  not 
uncommon,  when  electric  bulbs,  for  example, 
are  broken  (and  the  new  kinds  are  expen- 
sive), or  oil  is  wasted  (and  its  price  is  rising 
constantly),  to  hear  the  operative  say  jok- 
ingly, "What's  the  diff!  the  company's 
rich."  Yet  the  same  operative  worries  when 
he  spoils  a  small  part  of  his  work  because  he 
feels  a  direct  responsibility  to  check  this 
condition. 

A  supply  store-room  was  established,  some 
study  was  given  to  fix  the  necessity  and 
amount  of  supplies  to  be  used.  They  were 
issued  only  on  order  of  the  foremen,  charged 
to  his  department  in  the  expense  analysis, 
and  the  total  detailed  cost,  with  comments 
thereon  from  the  management,  given  the 
foremen  monthly.  This  had  a  decided  eco- 
nomical effect.  The  foremen  realized  their 
responsibility  immediately,  and  they  real- 
ized that  the  management  had  a  measure  of 
it.  They  began  to  see  to  it  that  their  men 
realized  that  supplies  cost  money,  for  the 
figures  shown  them  monthly  gave  them  a 
definite  measure  thereof.  It  became  im- 
pressed upon  their  men  through  them,  that 
economy  of  supplies  is  due  to  watchfulness 


REDUCING  FACTORY  EXPENSE        109 

and  care,  and  that  this  was  as  important  as 
any  other  economy.  Morale  was  introduced 
— a  tremendous  aid  to  efficiency. 

A  second  important  element  of  expense, 
taken  into  consideration  promptly,  was  re- 
pairs. The  cost  of  repairs  is  probably  the 
most  difficult  of  all  expense  elements  to  con- 
trol. It  possesses  no  regularity  to  be  stand- 
ardized. Its  necessity  is  not  offset  by  any 
feeling  of  gain  made  by  satisfying  it.  It  is 
done  merely  to  prevent  loss,  for  the  necessity 
is  generally  considered  as  due  to  careless- 
ness. There  is  too  seldom  in  operation  in 
most  plants  any  systematic  inspection  and 
oiling  of  machinery.  The  operatives  of  ma- 
chinery too  seldom  understand  the  mechan- 
ism, or  speed,  of  the  machines  they  operate. 
The  machines  therefore  are  liable  to  get  out 
of  order  quickly.  Each  repair  is  usually  a 
different  proposition  from  previous  ones. 
The  question  of  how  long  a  repair  ought  to 
take  in  the  making,  has  never  been  given  any 
study  as  compared  with  direct-labor  opera- 
tions. Many  repairs  are  rush  jobs  to  per- 
mit of  restarting  production,  and  are  often 
made  without  regard  to  best  permanency. 
A  little  study  will  frequently  show  that  more 
repair  expense  is  spent  on  some  machinery 


110  EXPERIENCES   IN   EFFICIENCY 

in  a  year  than  replacement  would  cost,  but 
of  course  in  many  different  amounts.  Then 
there  are  days  when  the  repair  gang  has 
more  work  than  it  can  accomplish,  and  other 
days  when  there  does  not  seem  to  be  any 
necessity  to  hurry.  There  is  likewise  over- 
time and  Sunday  work  to  be  put  in,  unfitting 
the  men  for  the  next  day's  work.  Altogether, 
then,  repair  expense  is  difficult  to  control  be- 
cause of  its  irregularity,  and  the  impossibil- 
ity of  obtaining  standards. 

Now  certainly  this  is  a  terrible  score 
against  repair  expense,  but  it  exhibits  the 
necessity  of  a  good,  hustling,  common-sense 
foreman  and  the  value  of  care  of  plant  and 
machinery  as  a  means  of  avoiding  this  ex- 
pense. 

To  assist  in  controlling  and  reducing  this 
cost,  a  repair  schedule  was  first  made,  which 
consisted  merely  of  a  large  sheet,  or  sheets, 
with  all  orders  and  description  listed.  This 
list  permitted  a  quick  and  complete  view  of 
repairs  and  changes.  All  repairs  or  altera- 
tions were  done  only  on  order  signed  by  the 
superintendent.  Eush  repairs  were  of  course 
put  through  at  once,  but  in  case  of  all  other 
repairs  the  schedule  was  considered  at  an 
every-other-day  meeting  by  the  foreman  of 


REDUCING  FACTORY   EXPENSE  111 

the  repair  department  and  the  superintend- 
ent, and  the  work  was  laid  out  with  instruc- 
tion cards  for  the  repair  men  for  at  least 
two  days  ahead.  Each  instruction  card,  be- 
ing also  a  time  note,  had  a  standard  of  time 
set  (very  frequently  by  guesswork)  as  to 
how  long  the  repair  should  take,  and  a  bonus 
for  the  repair  man  who  bettered  the  stand- 
ard. Always  two  full  days'  work  was 
planned  for  each  man,  and  instruction  cards 
for  this  period  issued  to  him.  By  this  means, 
then,  the  repair  man  got  the  idea  that  he  was 
"full  of  work",  and  had  some  standards  to 
go  by,  even  if  they  were  not  scientific,  and  in 
the  work  thus  laid  out,  preparation  was 
made  so  that  delay  was  avoided  in  repair. 

Perhaps  a  digression  will  be  pardoned 
here  for  a  slight  consideration  of  this  form 
of  "guess"  incentive  method.  There  are 
frequently  forms  of  work,  like  repairs, 
where  each  job  is  different  from  the  next. 
It  might  seem  that  such  are  impossible  of 
impetus  through  incentive,  because  of  lack 
of  standard  units.  But  these  jobs  do  contain 
certain  standards,  not  readily  set  down  on 
paper,  but  rather  sensed  by  the  practical 
man  who  is  familiar  with  them.  So  it  is  not 
a  scientific  fact,  but  it  is  a  practical  fact, 


112  EXPERIENCES   IN"   EFFICIENCY 

that  in  the  hands  of  the  practical  man  a 
"guessed  at"  rate,  really  obtained  through 
the  mental  action  of  a  mind  with  good  judg- 
ment and  practical  experience,  hits  very 
close  to  the  mark  on  the  average,  and  has  the 
effect  of  accomplishing  economy  by  keeping 
the  operative  thinking  and  hustling. 

This  constant  going  over  the  schedule  for 
repair  orders  by  the  superintendent  and 
foreman  of  repairs,  with  occasional  confer- 
ences with  the  room  foremen,  gave  a  famil- 
iarity with  the  situation  not  before  had,  and 
led  to  criticisms  of  the  care  of  machinery, 
the  necessity  and  method  of  repair,  the  value 
of  certain  repair  men,  which  brought  about 
changes  and  economies  unexpected.  In  fact, 
the  question  of  repairs  had  constant  and  de- 
tailed study,  instead  of  as  formerly  and 
usually,  the  attempt  of  the  foreman  of  re- 
pairs to  carry  out,  on  his  own  best  judgment, 
any  and  all  orders  sent  him.  And  in  this 
solution  is  really  involved  a  large  fact,  which 
should  be  a  definitely  understood  principle 
of  efficiency — namely,  that  in  all  manufac- 
turing there  are  constantly  arising  situa- 
tions and  necessities  for  action  which  cannot 
usually  be  most  satisfactorily  met  by  the 
judgment  of  one  man,  but  require  for  best 


REDUCING  FACTORY  EXPENSE  113 

solution  discussion  by  several,  involving  co- 
operation. This  principle  indeed  underlies 
the  whole  question  of  expense  reduction. 

The  expense  analysis  showed  each  month 
the  cost  of  repairs  in  each  department,  and 
each  month  these  figures  were  given  to  the 
room  foreman.  It  is  not  hard  to  believe, 
then,  that  this  method  eventually  led  to  a 
reduction  in  repair  cost.  But  this  economy 
was  obtained  only  by  hard  work  and  study. 

A  third  element  of  expense  study  was  non- 
productive or  indirect  labor.  Now  direct 
labor  is  given  intense  study,  but  what  execu- 
tive pays  the  same  attention  to  his  indirect 
labor,  to  the  elevator  man,  the  sweeper,  the 
inspector,  the  shipper,  the  trucker,  etc.? 
Yet  this  class  of  labor  is  expensive,  and  taken 
throughout  a  plant  of  any  size  amounts  in 
volume  of  wages  to  a  considerable  sum. 
When  it  is  considered  that  in  most  plants 
from  10  to  30  per  cent  of  the  employees  are 
non-producers,  it  is  plain  that  there  is  a  large 
field  here  for  efficiency  work.  And  it  is  not 
too  much  to  say  that  at  given  periods  of  the 
year  the  capable  executive  can  go  through 
his  plant  and  make  decided  economies  in  cut- 
ting out  non-producers,  who,  by  changing 
conditions,  or  occasional  and  ill  considered 


114  EXPERIENCES   IX   EFFICIENCY 

judgment  in  addition,  are  "making  the  work 
last  the  day". 

It  ought  to  be  no  part  of  any  economic 
system  to  blame  the  operative,  especially  the 
unskilled  one,  for  "  soldiering ",  loafing,  or 
"making  the  work  last  the  day",  for  after 
all  the  hold  and  influence  of  the  ordinary  and 
unskilled  worker  on  his  place  in  any  particu- 
lar industry  or  business  is  so  slight,  and  his 
strong  selfish  interest  in  life  and  the  support 
of  his  family  so  great,  that  if  he  willingly 
co-operates  to  do  just  what  he  is  told  to  do, 
he  is  hardly  to  be  blamed  if  he  realizes  it  is 
to  his  interest  to  appear  to  be  busy  during 
the  time  he  is  paid,  rather  than  to  work  him- 
self or  his  companion  out  of  a  job.  This  of 
course  may  not  be  the  moral  view  of  the 
situation.  It  is  purely  the  actual  and  practi- 
cal one,  and  any  system  should  simply  be 
based  on  it  as  a  fact.  While  it  is  true  that 
the  exceptional,  ambitious,  and  capable  man 
shows  his  superiority  to  this  view,  and  con- 
sequently generally  rises  out  of  his  position 
by  rising  above  it  and  the  methods  it  entails, 
nevertheless  it  should  be  the  part  of  the  ex- 
ecutive, and  of  any  economic  system  he  em- 
ploys, to  meet  the  case  as  it  stands. 

In  this  case  the  work  of  each  of  these  em- 


REDUCING  FACTORY   EXPENSE  115 

ployees  was  studied — their  busy  days,  their 
busy  times  of  each  day,  and  the  amount  of 
work  they  did  per  day.  This  really  in- 
volved the  larger  questions  of  the  move- 
ments of  materials,  and  the  relations  between 
the  departments.  The  net  result  was  satis- 
factory from  an  economical  point  of  view. 
For  it  soon  became  plain  that  while  no  one 
of  these  employees  could  fairly  be  called  a 
loafer,  yet  because  of  a  lack  of  capable  ar- 
rangement or  co-ordination  of  their  tasks, 
and  particularly  because  they  lacked  an  in- 
centive and  the  same  attention  and  constant 
"hustle"  given  their  producing  shopmates, 
there  existed  large  possibilities  of  greater 
efficiency  among  them.  These  possibilities 
were  brought  out  in  various  ways.  In  some 
cases  certain  tasks  were  rearranged  to  fit  in 
with  others,  and  a  time  schedule  arranged. 
In  many  cases  two  men  were  given  the  for- 
mer tasks  of  three,  with  a  bonus  if  they  ac- 
complished them.  In  some  cases  it  was 
found  possible  to  introduce  straight  piece- 
work, as  in  sweeping  and  shipping,  with  a 
reduction  in  the  number  in  the  gang,  and  in- 
creased pay  to  those  left.  But  altogether  a 
tidy  sum  was  saved  in  the  non-productive 
labor. 


116  EXPERIENCES   IN   EFFICIENCY 

In  the  matter  of  tools,  a  systematization 
along  the  lines  (now  fairly  well  known)  of 
their  care  and  issue,  also  brought  a  decided 
saving.  The  power  cost  did  not  prove  sus- 
ceptible of  reduction,  and  the  office  and  ad- 
ministration expense  was  actually  increased 
by  some  three  or  four  clerks  because  of  the 
introduction  of  the  cost  system  and  statis- 
tics. But  items  of  general  expense,  which 
included  all  the  odds  and  ends  other  than 
those  mentioned  which  could  not  be  charged 
to  department  expense,  were  likewise  stud- 
ied, and  certain  extravagances  in  stationery, 
postage,  etc.,  were  discovered  and  remedied. 

In  a  properly  divided  expense,  general  ex- 
pense is  a  sort  of  catch-all,  which  shows,  in 
addition  to  the  administration  expense,  all 
those  little  and  sometimes  large  items,  which 
are  the  result  of  the  executive's  ventures 
into  policies  which  have  not  succeeded,  his 
co-operation  with  other  concerns  in  the  car- 
rying forward  of  plans  for  the  general  good, 
advice  which  he  seeks,  legal  or  otherwise, 
and  those  miscellaneous  expenses  due  to  the 
office  use  of  supplies.  It  will  always  stand 
study  and  consideration,  for  it  frequently 
tells  a  very  interesting  story,  and  despite 
the  superior  intelligence  of  those  who  are  re- 


REDUCING   FACTORY    EXPENSE  117 

sponsible  for  it,  shows,  no  less  than  the  de- 
partment expense,  a  strong  tendency  (and 
indeed  a  natural  one  on  account  of  the  salary 
increases)  to  increase  in  bulk.  While  in 
theory  increase  in  volume  of  production  of 
the  ordinarily  successful  plant  is  supposed 
to  keep  down  its  ratio  to  the  production  unit, 
only  constant  care  makes  the  practice  con- 
form to  the  theory. 

Thus  the  main  elements  of  expense,  sup- 
plies, repairs,  non-productive  labor,  power, 
tools,  general  expense,  were  each  taken  up, 
studied,  discussed,  and  altered  where  possi- 
ble. Eight  through  the  whole  expense  an- 
alysis each  expense  item  ran  the  gamut  of 
criticism,  suggestion,  experiment,  and  cut 
and  try.  In  many  cases  the  economies,  and 
the  methods  employed,  might  almost  make  a 
story  in  themselves,  for  they  were  not  al- 
ways brought  about  readily. 

In  many  cases,  once  the  expenses  had  been 
reduced,  the  fixed  standard  or  budget  plan 
was  used  to  keep  them  down.  This  plan 
consists  merely  in  fixing  a  monthly  sum  be- 
yond which  the  department  is  not  allowed  to 
go  in  its  expenses,  and  in  certain  cases  it  is 
very  valuable  in  its  effect.  In  some  cases 
where  judgment  was  particularly  to  be  exer- 


118  EXPERIENCES   IN   EFFICIENCY 

cised,  the  foremen  were  paid  bonuses  for  re- 
ducing expense  or  keeping  it  to  a  standard. 
It  took  some  six  months  of  time  to  accom- 
plish a  fairly  satisfactory  result;  but  it  was 
well  worth  while,  for  the  relation  of  expense 
to  the  productive  hour  was  actually  reduced 
by  some  20  per  cent,  which  meant  a  saving 
of  many  thousands  of  dollars.  And  it  was 
well  worth  while  for  several  other  reasons. 
For  in  the  first  place,  it  gave  the  manage- 
ment a  real  knowledge  of  the  factory  opera- 
tion, which  it  had  thought  it  possessed,  but 
did  not.  It  had  builded  the  expense  struc- 
ture bit  by  bit  (an  entirely  common  and 
somewhat  necessary  method  in  growing 
plants),  and  it  saw  the  whole  now  for  the 
first  time  in  many  years.  Each  department 
had  been  taken  off  its  peg,  looked  over  and 
cleaned,  just  as  a  jeweler,  with  his  magnify- 
ing lens  in  his  eye,  might  take  down  from 
his  board  watch  after  watch,  clean  and  re- 
pair it,  and  hang  it  up  to  go  on  ticking  accu- 
rately and  merrily.  And  the  clean-up  gave 
the  management  a  new  grasp  of  the  situa- 
tion, and  new  courage  and  energy.  It  was 
made  very  plain  to  them,  as  a  single  in- 
stance, for  example,  that  it  was  just  as  im- 
portant to  them  to  weigh  in  advance  the  ad- 


REDUCING  FACTORY  EXPENSE        119 

dition  of  one  non-producer  at  a  cost  of  $500 
a  year  as  it  would  be  to  investigate  the  wis- 
dom of  purchasing  an  $8,000  machine,  the 
interest  on  which  investment  would  approxi- 
mate $500.  It  became  clear  to  them  that  ex- 
pense in  practice  (no  matter  what  the 
theory)  is  a  good  deal  like  a  fruit  tree — a 
necessary  thing  if  the  fruit  of  good  profits 
is  to  grow,  but  needing  constant  and  careful 
pruning,  sometimes  grafting;  and  the  older 
it  gets,  and  the  larger  the  plant,  the  more 
careful  attention  and  pruning  is  needed. 

This  study  brought  likewise  and  necessar- 
ily economies  and  changes  in  the  matter  of 
material  and  labor ;  for  so  closely  is  expense 
allied  to  these  elements,  that  the  study  of 
one  leads  essentially  into  consideration  of  the 
effect  on  the  others ;  and  always  it  was  neces- 
sary to  make  sure  that  changes  in  expense 
formation  brought  no  reduction  in  the  effi- 
ciency of  the  others.  And  of  course  such 
studies  suggested  improvements. 

Furthermore,  in  the  second  place,  this 
work  led  the  management  into  closer  touch 
and  accord  with  the  factory  organization. 
The  latter  gained  new  ideas  as  to  their  re- 
sponsibilities. They  realized  that  there  was 
something  to  their  tasks  besides  mere  vol- 


120  EXPERIENCES   IN   EFFICIENCY 

ume  and  quality  of  production,  important  as 
they  were.  They  gained  (those  who  remained 
as  capable  ones)  a  larger  idea  of  the  watch- 
fulness and  intelligence  of  the  management 
under  which  they  were  serving.  Morale  ar- 
rived. 

So  in  this  case  large  savings  in  expense, 
made  by  study,  by  discussion  based  on  the 
expense  analysis  as  showing  true  expense 
relations,  and  by  co-operation  of  the  whole 
organization,  were  accomplished.  And  after 
all,  how  else  can  expense  as  an  element  be 
controlled! 


CHAPTER  IX 
BUILDING   A   COST    SYSTEM 

THAT  executive  would  be  a  bold  one 
(and  perhaps  some  might  use  another 
adjective)  who  would  today  deny  to  his 
plant  an  advantage  in  the  possession  of  a 
cost  system.  Not  that  this  statement  is  to 
be  construed  to  mean  that  every  manufac- 
turing plant  has  a  right  and  effective  cost 
system,  nor  that  there  is  any  agreement  as 
to  how  far  it  is  necessary  and  valuable  to 
carry  a  cost  system.  It  is  indeed  the  com- 
mon complaint  of  those  executives  who  have 
had  modern  cost  systems  installed  that  most 
of  their  competitors  appear  to  be  without 
any,  and  in  a  measure  they  are  very  close  to 
the  truth.  Most  plants,  however,  have  some 
method  of  figuring  their  costs,  although  the 
occasional  boast  one  hears  that  a  certain 
plant's  system  is  "all  its  own"  has  a  Gil- 
bertian  flavor. 

And  it  may  further  be  taken  for  true  that 

121 


122  EXPERIENCES   IN   EFFICIENCY 

most  plants  have  cost  systems  that  may  be 
termed  "  occasional"  or  "approximate", 
not  continuous  and  complete ;  for  that  plant 
which  has  developed  the  cost  system  to  its 
farthest  value  is  even  today  still  somewhat 
rare.  Indeed,  it  takes  some  courage  of  ex- 
penditure and  constant  patience  to  develop 
a  thorough  system,  and  the  remark  of  one 
manager,  in  explaining  his  lack,  that  you 
" can't  make  a  bookkeeper  out  of  a  dago", 
is  both  a  criterion  of  the  labor  market  in 
some  localities,  and  of  one  of  the  difficulties 
of  the  case,  though  by  no  means  insuperable. 

Now  no  long  arguments  are  to  be  ad- 
vanced here  as  to  the  value  of  the  cost  sys- 
tem in  every  business.  No  intelligent  man- 
ager is  going  to  deny  the  value  to  him  of  a 
knowledge  of  the  facts  of  his  business,  if  he 
is  satisfied  that  they  are  facts,  even  if  he 
does  not  possess  them.  The  burning  ques- 
tion is  how  far  to  carry  the  cost  system  in  its 
completeness. 

It  is,  however,  true  that  the  complete  facts 
of  the  business  can  be  shown  in  any  way 
desirable;  that  complete  and  practically  ac- 
curate records  of  the  use  of  material,  labor, 
and  expense  can  be  gathered;  that  it  can  be 
done  with  no  great  expenditure  of  clerical 


BUILDING   THE   COST   SYSTEM  123 

labor ;  and  that  it  is  very  profitable  to  do  so. 
But  those  who  have  no  theoretical  doubt  of 
this,  still  find  many  difficulties  in  a  practical 
attainment,  and  perhaps  the  story  of  the  in- 
troduction, development,  and  use  of  a  cost 
system  in  a  plant  already  successful,  may  be 
of  interest  as  illustrating  this. 

It  is  a  somewhat  long  story  perhaps,  with 
no  particularly  exciting  incidents,  but  then 
that  is  just  the  truth  of  obtaining  a  cost  sys- 
tem— it  is  a  long,  slow  job.  And  while  the 
introduction  of  modern  methods  may  be  as 
difficult  and  slow  of  progress,  and  need  as 
much  preparation,  patience,  and  persistence 
as  the  discovery  of  the  poles  demanded 
(and  be  much  more  useful  to  humanity), 
nevertheless,  the  details  are  so  common  and 
intimate  to  most  of  us,  in  some  phase  or  par- 
ticipation, that  no  writer  of  shop  adventure 
has  been  able  to  make  their  recital  as  widely 
read. 

This  particular  cost  problem  was  worked 
out  in  a  machine-building  plant  employing 
about  one  hundred  and  twenty-five  men,  in- 
volved in  three  main  departments — a  foun- 
dry, a  wood-working  plant,  and  a  machine 
shop,  with  a  product  varied  in  six  or  eight 
main  classes,  and  repairs  on  all  of  these. 


124  EXPERIENCES   IN   EFFICIENCY 

While  a  certain  amount  of  the  work  was 
standard,  yet  much  of  it  varied  in  size  and 
detail,  necessitating  bids,  and  much  repair 
work  was  done. 

The  executive,  often  away  from  his  plant, 
wanted  several  definite  results,  regularly 
and  accurately,  as  a  means  of  giving  him 
some  control  of  the  situation.  He  wanted, 
first,  certain  figures  of  labor  costs  and  ex- 
pense percentages  as  a  proper  basis  for  esti- 
mating. He  wanted,  secondly,  to  know  the 
true  cost  of  every  order  finished,  so  that  he 
might  know  where  profits  and  losses  were. 
He  wanted,  finally,  his  expenses  correlated 
and  compared  in  detail  monthly,  as  a  means 
of  controlling  them. 

The  first  need  was  of  course  automatically 
met  when  the  second  was  filled,  and  the 
third  was  essential  in  obtaining  the  second. 
Not  unnaturally  there  eventually  came  out 
of  the  fulfillment  of  these  needs  a  fourth 
value,  viz.,  a  complete  showing  of  profit  and 
loss  for  the  whole  plant  each  month,  the 
showing  being  made  as  to  all  the  work,  di- 
vided into  eight  different  classes.  And  the 
yearly  inventory  developed,  not  as  usual  into 
a  means  of  discovering  whether  any  and  how 


BUILDING   THE    COST    SYSTEM  125 

much  profit  was  made,  but  merely  as  a  means 
of  checking  the  figures  shown  monthly. 

Now  the  needs  of  this  executive  are  essen- 
tially the  needs  of  every  executive.  But  it 
cannot  be  said  that  they  are  fulfilled  often 
or  completely  enough,  and  indeed  rather  sel- 
dom is  the  final  development  of  a  complete 
monthly  showing  brought  about. 

There  are,  of  course,  many  reasons  for 
this.  In  the  first  place,  all  businesses,  on  ac- 
count of  variations  of  processes,  length  of 
time  in  progress  of  production  and  difficulty 
of  tracing  elements  to  final  product,  are  not 
equally  susceptible  to  the  obtaining  of  these 
results.  In  the  second  place  the  expense  of 
going  the  full  distance  indicated  in  certain 
classes  of  work  may  not  seem  warranted  by 
possible  returns.  But  unfortunately,  and 
most  frequently,  the  valid  reason  that  exists 
for  not  obtaining  the  results  is  that  the  ex- 
ecutive is  not  willing  nor  able  to  give  his 
time  in  the  development  of  the  system,  to 
help  work  out  the  details  and  overcome  the 
difficulties,  and  to  interpret  the  results  when 
obtained.  And  it  appears  extremely  difficult 
to  obtain  cost  clerks  or  bookkeepers  capable 
of  carrying  out  and  interpreting  the  system 
in  a  practical  way. 


126  EXPERIENCES   IN  EFFICIENCY 

The  human  equipment  in  this  case  con- 
sisted of  a  bookkeeper  and  an  assistant,  since 
augmented  after  three  or  four  years  of  op- 
eration (and  because  of  increase  of  business) 
by  another  assistant.  But  these  two  were 
very  capable  and  hard-working.  The  only 
other  office  force  that  existed  in  the  plant 
were  two  stenographers,  although  there  were 
an  engineer  and  his  assistant,  who  had  their 
part  in  the  system,  as  will  be  seen  later. 

Now  this  equipment  is  a  very  important 
element  in  the  cost  situation.  As  a  matter 
of  fact,  it  is  by  far  the  most  important  ele- 
ment in  the  development  and  use  of  a  cost 
system.  For  costs  are  not  a  matter  of  fig- 
ures. Even  bookkeeping  is  not  an  exact  sci- 
ence. For  behold!  how  often  is  it  that  one 
man  will  put  into  the  expense  account  a 
given  expenditure,  say  the  rebuilding  of  a 
machine,  thus  reducing  his  profits  by  this 
amount,  while  another  will  put  such  an 
item  to  asset  account.  And  each  can  ad- 
vance weighty  arguments  and  reasons  as  to 
the  logic  of  his  methods.  But  the  net  results 
of  operation  will  differ  widely  with  the  same 
actual  occurrences,  so  that  even  bookkeeping 
may  be  said  merely  to  present  results  de- 
pendent upon  the  aspects  of  the  situation,  as 


BUILDING  THE   COST   SYSTEM  127 

rendered  by  those  who  have  the  authority 
or  opportunity  to  interpret.  Now  the  same 
and  indeed  greater  opportunity  to  render 
varying  interpretations  exists  in  cost  work, 
but  much  aggravated  by  the  further  fact 
that,  while  bookkeeping,  through  the  double- 
entry  system,  offers  a  proof,  and  gathers  in 
all  the  facts  (even  though  some,  by  misin- 
terpretation, may  be  wrongly  placed),  cost 
keeping  offers  the  further  very  strong  temp- 
tation to  present  incomplete  figures  as  com- 
plete. For  the  gathering,  or,  rather  let  us 
say,  the  arranging  of  channels  for  continu- 
ous and  correct  gathering  of  facts  (involv- 
ing, as  it  must,  all  the  operatives,  their 
necessary  co-operation,  their  changing  work, 
the  issuing  of  and  keeping  track  of  raw  ma- 
terial, and  the  proper  correlation  of  ex- 
penses), is  a  laborious,  painstaking,  and  fre- 
quently discouraging  task.  Successful  ac- 
complishment demands  therefore  a  good 
equipment — common  sense,  patience,  diplo- 
macy, a  sense  of  accuracy,  and  an  ability  to 
interpret  facts  and  figures — for  all  of  which 
most  executives  are  willing  to  pay  the  cost 
clerk  possessing  them  $15.00  to  $20.00  a 
week ! 

This,  then,  was  the  situation: — machine- 


128  EXPERIENCES   IN   EFFICIENCY 

building  plant;  three  departments,  foundry, 
wood- working,  machinery;  one  hundred  and 
twenty-five  men;  product  varied  in,  say, 
eight  main  classes ;  all  work  put  through  the 
plant  on  order  numbers. 

Wanted:  a  cost  system  showing  in  detail 
the  cost  of  each  order — proved,  and  leading 
eventually  through  the  bookkeeper  to  a  com- 
plete profit  and  loss  shown  monthly — same 
to  be  checked  yearly  by  inventory. 

Equipment:  bookkeeper  and  assistant. 
Incidentally  there  were  three  foremen,  and 
they  were  pretty  good  foremen  as  foremen 

go- 
Well — the  installation  of  the  cost  system 

was  undertaken  in  the  usual  divisions  of  ma- 
terial, labor  and  expense. 

The  development  was  made  along  all  three 
divisions  simultaneously,  but  necessarily 
progressed  in  the  division  of  expense  most 
rapidly.  This  was  because  of  two  reasons — 
(1)  the  total  expense  figures,  with  the  excep- 
tion of  certain  items  of  materials  and  labor 
(the  definite  use  of  which  had  to  be  regularly 
reported  from  the  factory),  rested  monthly 
in  a  total  in  the  books,  which  total  was  read- 
ily analyzable  from  the  entries;  and,  (2),  the 


BUILDING  THE   COST   SYSTEM  129 

work  of  the  expense  analysis  involved  only 
one  man — the  bookkeeper. 

Of  course  it  was  necessary  in  analyzing 
this  expense  first  to  decide  into  what  main 
divisions  the  expense  should  be  divided — 
and  the  three  departmental  divisions  of  foun- 
dry, wood-working  shop,  and  machine  shop, 
with  the  further  division  of  selling,  were 
chosen.  It  was  then  necessary  to  settle  upon 
a  relation  of  expense  to  the  running  produc- 
tion, so  that  when,  in  any  given  order,  the 
material  and  labor  cost  had  been  collected, 
the  proper  proportion  of  expense  might  be 
added;  and  it  was  decided  to  show  the  de- 
partmental expense  cost  per  productive  hour 
of  labor  and  the  selling  expense  cost  per 
dollar  of  sales.  No  argument  can  be  enter- 
tained here  as  to  the  validity  of  these  deci- 
sions. They  have  been  treated  elsewhere.* 

These  things  decided,  it  was  merely  a  mat- 
ter of  time  to  produce  from  the  books  an  ex- 
pense analysis  for  each  department,  showing 
month  after  month — in  comparative  detail — 
the  expense  and  its  relation  to  production, 
with  also  period  figures  showing  the  average 

*  See  Cost  Reports  for  Executives.  By  Benj.  A.  Franklin. 
The  Engineering  Magazine  Co. 


130  EXPERIENCES   IN   EFFICIENCY 

relation  over  a  given  time.    This  was  merely 
a  bookkeeper's  job. 

But  when  finally  produced  the  result  was 
astonishing  and  disappointing  to  the  execu- 
tive. He  had  always  had  some  idea  what 
value  of  materials  and  labor  went  into  cer- 
tain machines,  because  their  application  was 
direct,  and  individually  measurable  as  to  any 
given  order.  But  expense  had  always  been 
a  guess  because  of  its  general  application. 
And  so,  when  proper  depreciation  and  all  the 
other  marshalled  expenses  of  each  factory 
department  were  taken  into  consideration 
and  shown  in  relation  to  the  running  game, 
i.  e.  as  so  much  per  every  working  hour,  the 
executive  was  a  little  startled.  For  he  dis- 
covered that  he  was  not  making  profits  in 
the  way  he  had  thought,  and  also  he  found 
out  that  it  costs  more  to  keep  a  workingman 
working  for  an  hour,  than  the  man  was  paid 
for  that  hour.  And  indeed  this  is  usually 
the  case,  varying  very  greatly  of  course  with 
the  kind  of  work  and  the  size  of  the  plant. 
And  though  there  is  a  tendency  constantly 
for  wages  to  rise,  it  is  true,  despite  all  theo- 
ries of  expense-ratio  reduction  because  of 
volume  increase,  etc.,  that  the  tendency  in 
practice  for  expense  to  rise  both  in  total  and 


BUILDING  THE   COST   SYSTEM  131 

per  cent  is  fully  as  strong  as  that  of  wages, 
and  can  be  kept  down  only  by  intelligent  and 
vigorous  economy.  But  this  analysis,  show- 
ing the  same  expenses  comparatively  month 
after  month,  offered  the  executive  a  means 
of  criticism  and  control  of  expense.  The 
discovery  of  the  true  relation  of  expense  to 
production,  and  the  variation  on  this  point 
in  the  different  departments,  immediately 
brought  the  executive  closer  to  the  facts  of 
the  situation  and  caused  actions  looking 
toward  the  profit  and  loss  column  to  be  dis- 
cussed later. 

But  the  expense  analysis  also  emphasized 
one  other  important  feature  in  cost-system 
building,  viz.,  a  total  sum,  provably  complete, 
was  always  started  with,  and  the  analysis 
showed  what  became  of  it.  Eventually  this 
same  method  was  adhered  to  in  the  matter 
of  material  and  labor,  so  that  always  a  proof 
was  maintained.  Thus  eventually  the  total 
expenditures  of  the  business  were  divided 
into  the  three  main  heads  of  material,  labor, 
and  expense,  and  these  were  analyzed  on  to 
order  costs  instead  of  operating  from  the  de- 
tail to  the  total. 

Now  of  course  this  expense  analysis,  sim- 
ple as  it  was,  did  not  arrive  at  once.  It  was 


132  EXPERIENCES  IN  EFFICIENCY 

necessary  to  get  certain  facts  for  it  from  the 
factory.  One  of  the  most  important  was  the 
amount  of  non-productive  or  indirect  labor, 
and  the  obtaining  of  this  item  was  involved 
in  the  whole  problem  of  getting  an  analysis 
of  the  application  of  the  second  main  divi- 
sion of  cost — labor.  And  here  is  where  the 
first  troubles  began. 

For  when  the  doings  of  labor  began  to  be 
collected  in  any  reasonably  exact  way,  of 
course  every  man  in  the  shop  became  in- 
volved, and  human  nature  came  into  full 
play.  The  foremen  had  the  loudest  com- 
plaint to  make,  for  it  was  attempted  to  issue 
through  their  instrumentality  all  time  notes 
made  out  from  the  orders  in  their  charge. 
The  work  was  too  onerous  and  too  distract- 
ing to  them.  They  were  men  well  along  in 
life,  and  their  ways  were  "set".  Of  course 
a  clerk  might  have  been  put  at  this  work. 
It  usually  takes  in  fact  a  certain  amount  of 
expense  in  clerical  labor  to  gather  shop  data 
for  costs.  In  most  plants  this  must  be  reck- 
oned upon  to  some  extent.  This  was  not, 
however,  a  large  shop  and  it  was  believed 
that  the  facts  could  be  gathered  cheaply. 

Eventually  the  way  out  proved  to  be  not 
so  far  removed  from  the  most  modern  meth- 


BUILDING  THE   COST   SYSTEM  133 

ods.  For  it  was  finally  decided  that  the  en- 
gineering department,  in  making  out  its  or- 
ders, was  to  make  them  in  the  detail  of  the 
operations  on  each  part,  and  these  were 
made  in  the  form  of  time  notes  with  neces- 
sary instructions  on  them.  This  did  not  of 
course  include  every  little  odd  job  that  was 
done.  For  these,  there  were  blank  notes 
which  the  foreman  willingly  handled. 

It  thus  became  the  duty  of  the  foreman 
merely  to  see  that  in  giving  out  and  taking 
in  the  time  notes  of  the  workers,  the  times 
were  properly  stamped  thereon.  The  fore- 
men satisfied,  and  their  co-operation  gained, 
the  workers  were  not  so  difficult  to  handle. 
A  willing  foreman  is  half  the  battle  won. 
There  was  the  worker  who  could  not  speak 
English,  termed  the  "dago"  by  those  who 
could  not  speak  his  language,  but,  with  his 
time  note  made  out,  he  could  easily  punch 
the  time  of  starting  and  finishing  on  a  time 
clock,  or  indeed  write  it.  And  once  he  was 
shown,  he  did  it  more  willingly  than  his  more 
fortunately  linguistic  shop-mate. 

There  was  the  suspicious  man  who  was 
afraid  the  company  had  some  ulterior  motive 
in  finding  out  exactly  the  time  in  which  he 
did  his  work — the  careless  man,  the  thick- 


134  EXPERIENCES   IN   EFFICIENCY 

skulled  one,  etc.,  but  all  these  with  time  and 
patience  came  into  line,  for  the  time  note 
and  instruction  card  combined  really  im- 
proved the  situation  over  the  old  way  of 
verbal  instruction.  But  they  all  came  into 
line  more  particularly,  because,  in  all  recal- 
citrant cases,  the  situation  was  frankly, 
clearly,  and  sometimes  repeatedly  explained 
to  them,  and  their  co-operation  invited  to 
make  the  whole  shop  an  intelligent  unit. 
When  they  were  treated  as  human  beings 
they  responded.  But  patience  and  persist- 
ence were  needed  to  get  the  time  notes  finally 
practically  accurate — a  matter  of  five  min- 
utes inaccuracy  not  being  considered. 

Of  course  this  problem  comes  up  in  every 
plant.  Around  it  are  frequently  thrown 
safeguards  and  helps,  as  time  clocks,  clerical 
help,  etc.  These  are  always  valuable  aids, 
but  necessary  only  when  the  conditions  are 
complicated  and  the  force  is  large.  In  most 
shops  of  reasonable  size,  if  the  co-operation 
of  the  workers  is  obtained,  the  facts  can  be 
gathered  very  cheaply  and  sufficiently  accu- 
rately. 

Once  there  began  to  flow  to  the  office  the 
time  notes  of  the  men  (and  for  all  jobs  not 
finished  Saturday  night  a  special  time  note 


BUILDING  THE   COST   SYSTEM  135 

was  turned  in),  it  became  an  easy  job  to 
make  out  a  payroll  showing  not  merely  the 
hours  worked  and  the  pay  earned  by  each 
man,  but  an  analysis  of  this  showing  a  divi- 
sion of  the  labor  as  to  indirect  and  direct, 
and  the  hours  worked  on  each  order.  The 
indirect  labor  went  of  course  to  the  expense 
of  the  proper  department  in  the  extreme  an- 
alysis, and  the  direct  labor  to  the  record  of 
order  cost. 

And  thus  the  total  weekly  payroll  was 
analyzed  each  week,  and  proved.  Thus, 
again  working  from  the  total  paid  to  all  la- 
bor, the  complete  proved  analysis  was  pre- 
sented. 

It  actually  took  two  or  three  days  a  week 
to  make  this  analysis.  To  the  assistant  who 
undertook  it,  it  at  first  seemed  a  terrific  task 
to  take  the  time  notes  of  one  hundred  and 
twenty-five  men,  averaging  possibly  some 
eight  or  ten  per  week,  to  set  down  on  a  pay- 
roll all  the  facts  of  pay  for  each  man  and  all 
amounts  of  hours  and  charges  for  each  order 
number,  and  then  make  them  all  add  up  cor- 
rectly. But  by  proving  the  figures  for  each 
man  separately  this  scheme  eventually 
worked  out  very  well  indeed,  and  since,  when 
the  expense  percentages  were  obtained,  the 


136  EXPERIENCES   IN   EFFICIENCY 

expense  chargeable  to  each  order  could  be 
added  on  the  payroll  sheet  to  the  labor 
chargeable  to  each  order  (see  "Cost  Reports 
for  Executives")  the  fact  that  on  this  one 
sheet  they  had  a  complete  weekly  proved  di- 
vision of  all  labor  and  expense  ready  for  dis- 
tribution to  cost  sheets  and  bookkeeping 
records, — this  fact  made  the  bookkeeper  and 
his  assistant  enthusiastic.  They  felt  they  had 
cleaned  up  the  situation,  and,  instead  of  hav- 
ing a  mass  of  disconnected  figures  on  their 
cost  sheets,  they  had  a  proved  situation  to 
be  sworn  by,  instead  of  at.  They  had  a 
weekly  grip  on  the  labor  and  expense  cost. 

The  next  step  now  was  to  corral  the  ma- 
terial. Most  of  the  difficulties  in  the  way  of 
this  were  physical.  Everyone  was  perfectly 
willing  to  report  material  used  if  the  means 
were  readily  offered.  Barring  those  occa- 
sions when  parts  might  be  spoiled  through 
careless  work  (not  so  recurrent  in  this  shop 
except  on  small  parts  controllable  through 
the  storeroom)  there  was  no  reason  material 
used  should  be  concealed. 

The  first  step  in  this  work  was  to  put  into 
shape  a  storeroom,  already  in  existence,  and 
arrange  that  any  materials  issued  therefrom 
should  be  reported  daily  by  requisitions  and 


BUILDING  THE   COST   SYSTEM  137 

with  order  numbers.  All  large  supplies,  such 
as  pig  iron,  coke,  etc.,  for  the  foundry,  lum- 
ber for  the  wood-working  shop,  and  iron  and 
steel  for  the  machine  shop,  could  not  be  put 
into  the  storeroom  of  course,  but  had  to  be 
under  the  general  charge  of  the  foreman  of 
the  department.  But  in  order  to  offer  a 
proper  basis  of  use  and  report,  the  engineer- 
ing department  again  came  to  the  rescue,  and 
undertook  to  issue  to  each  foreman  for  each 
order  a  bill  of  material  covering  all  parts 
kept  outside  of  the  storeroom,  and  of  course 
of  many  kept  in  the  storeroom. 

It  was  not  difficult  for  the  foundry  fore- 
man to  keep  track  of  pig  iron,  etc.,  used  daily, 
as  any  foundryman  will  recognize,  since  it 
was  necessary  to  weigh  it  for  the  furnace 
charge.  The  greatest  difficulty  came  in  the 
matter  of  lumber.  Here  for  many  reasons  a 
lumber-moving  gang  was  made  to  bring  in 
all  lumber  as  planned  by  the  foreman.  This 
situation  was  helped  by  the  fact  that  the  lum- 
ber yard  was  some  distance  from  the  shop. 

So,  through  the  storeroom,  the  engineering 
bills  of  material,  and  the  foremen's  daily 
report,  records  of  the  material  used,  and  on 
what  order  number,  were  started.  The 


138  EXPERIENCES    IN    EFFICIENCY 

question  arose,  however,  as  to  the  accuracy 
of  these  reports. 

Accuracy  could  be  checked  only  by  occa- 
sional inventories,  and  these  were  made,  with 
the  result  that  curious  and  natural  shrink- 
ages and  overages  were  discovered,  cor- 
rected, and  allowed  for.  Coke  was  found  to 
have  a  natural  shrinkage  of  about  7  per  cent 
between  carload  weight  paid  for,  and  truck 
load  weighed  into  furnace.  This  per  cent 
then  had  to  be  added  to  reported  weights. 
In  the  matter  of  lumber,  so  difficult  was  it  to 
make  the  feet  bought  and  the  feet  used  tally, 
that  eventually  a  definite  per  cent  was  added 
to  all  reported  as  used,  and  the  lumber  in- 
ventory was  always  expected  to  come  out 
higher  than  the  book  showing  of  it,  which 
it  has  done  for  the  last  five  years.  Cars  of 
pig  iron  were  checked,  bought  weight  against 
used  weight,  and  shortage  or  overage  taken 
care  of  in  the  costs. 

.  In  order  to  get  the  material  reports  into 
such  shape  as  the  payroll  for  cost  and  book- 
keeping purpose,  a  material  journal  (see 
"Cost  Eeports  for  Executives")  was  de- 
vised. Here  all  material  reported  was  cred- 
ited to  its  class  of  raw  material  on  one  side 
and  debited  to  its  class  of  work  in  process  on 


BUILDING   THE    COST    SYSTEM  139 

the  other,  the  sides  balancing  weekly.  And 
since  the  order  number  was  inserted  oppo- 
site each  item,  the  journal  offered  a  basis  of 
operation  both  for  cost  and  bookkeeping  pur- 
poses. 

And  so  eventually  the  material  was  cor- 
ralled, so  that  in  the  last  five  years  actual 
inventory  has  shown  it  practically  right. 

Expense,  labor,  and  material  figures  of 
proved  exactness  collected,  and  flowing  daily 
and  weekly  into  the  bookkeeper's  office,  the 
real  work  of  making  the  cost  system  and  of 
using  it  with  value  now  began.  And  this  was 
both  pleasant  and  troublesome. 

It  was  not  so  difficult  of  course  to  gather 
the  facts  of  labor,  expense,  and  material  onto 
a  sheet  showing  the  total  costs  of  each  order. 
The  real  difficulties  were  (1)  to  put  these 
figures  together  in  such  a  form  that  they 
would  tell  the  executive  the  true  story  of  the 
order  costs  quickly,  and  permit  a  rapid  back 
"trek"  to  details  as  desired;  (2)  to  tie  all 
these  facts  up  to  the  bookkeeping  so  that 
each  month's  trial  balance  told  the  story  of 
the  business  as  a  whole;  and  (3)  to  make 
the  proof  of  the  whole  as  easy  as  possible. 

There  was,  of  course,  still  the  largest  and 
longest  of  all  the  tasks — to  discover  oppor- 


140  EXPERIENCES   IN   EFFICIENCY 

tunities  of  economy  and  profit-making,  and 
operate  from  the  cost  system  so  as  to  bring 
them  about — in  fact,  to  gain  those  values 
which  the  cost  system  was  designed  to  give. 
But  this  was  not  a  matter  of  building  the 
system,  though  dependent  on  the  proper 
working  out  of  the  first  difficulty. 

It  would  be  impossible,  of  course,  to  re- 
count all  the  steps  that  were  gone  through  in 
overcoming  these  difficulties,  but  very  inter- 
esting if  all  the  scenes  could  be  re-enacted; 
for  the  executive  took  a  very  active  part  in 
them,  knowing  what  he  wanted  but  without 
accounting  knowledge,  and  the  bookkeeper 
possessed  accounting  knowledge,  lacking  the 
practical,  but  like  many  accountants  thought 
that  affairs  must  be  handled  according  to 
certain  routines.  And  always  there  had  to 
be  kept  in  mind  the  real  truth  of  the  book- 
keeping method,  v iz.,  that  it  is  not  a  set  of 
fixed  rules,  but,  consistent  with  the  double- 
entry  plan  for  proof  against  clerical  mis- 
takes, it  is  merely  a  method  of  putting  fig- 
ures together  to  show  results,  and  if  practical 
intelligence  demands  that  the  results  be  cast 
in  any  given  form,  bookkeeping  can  be  made 
to  fit  this  form. 

Bearing  in  mind,  then,  that  direct  labor 


BUILDING  THE   COST   SYSTEM  141 

was  shown  analyzed  by  order  numbers  each 
week,  completely,  with  expense  added  weekly 
by  rates  per  hour,  and  that  material  was  like- 
wise shown  in  the  material  journal  divided 
weekly  (labor  and  material  being  proved 
weekly,  and  expense  monthly)  it  is  readily 
seen  that  a  bookkeeper  could  weekly  record, 
on  a  properly  arranged  cost  sheet,  the  labor, 
expense,  and  material  in  such  detail  as  would 
easily  refer  back  to  the  record  in  case  of 
necessity  for  clarification,  and  in  such  col- 
umns as  would  permit  adding  them  at  the 
finish  of  the  order  to  show  total  labor  and 
expense  by  departments  and  material  by 
classes.  Thus  was  the  detailed  order  cost 
for  every  order  put  in  assembled  and  com- 
plete writing  a  week  at  most  after  its  ship- 
ment. 

For  the  sake  of  the  executive,  however, 
there  was  made  a  condensed  sheet — one  sheet 
for  each  kind  of  work — on  which  were  en- 
tered only  the  totals  in  the  detail  of  labor  and 
expense  by  departments  and  material  by 
classes,  showing  the  selling  price  and  the 
profit  and  loss.  Each  duplication  of  an  or- 
der was  placed  under  the  result  of  the  previ- 
ous order.  This,  as  can  readily  be  believed, 
gave  the  executive  a  quick  cost  knowledge  of 


142  EXPERIENCES   IN   EFFICIENCY 

each  job  put  through  his  plant,  and,  as  or- 
ders were  duplicated,  a  comparison  which 
soon  gave  him  a  grasp  of  the  situation.  And 
he  could  refer  back,  as  he  desired,  to  the  de- 
tail, when  the  results  proved  unsatisfactory 
to  him.  Thus  was  problem  No.  1  solved. 

Problem  No.  2  was  also  purely  a  book- 
keeper's task,  namely,  to  unite  all  these  facts 
into  a  monthly  showing  of  the  whole.  The 
work  was  divided  into  about  eight  classes 
into  which  all  work  finished  must  fall.  It 
was  merely  a  question  of  focusing  all  the  in- 
formation to  a  point,  where,  in  one  of  these 
eight  classes,  when  the  work  was  finished,  the 
sale  price  on  one  side  should  be  offset  by  the 
cost  on  the  other  side  to  get  the  balance  of 
profit  and  loss.  To  accomplish  this,  it  was 
necessary  to  establish  eight  accounts  of  work 
in  process,  and  desired  classes  of  raw-ma- 
terials account.  Bearing  the  fact  of  the 
weekly  payroll  sheets,  the  material  journal, 
etc.,  in  mind,  the  process  briefly  was  this. 
Weekly  when  the  payroll  was  finished,  with 
the  expense  added,  it  became  a  journal,  the 
totals  of  which  were  credited  to  labor  and 
expense  accounts,  and  debited  to  work-in- 
process  accounts.  The  material  totals  in  the 
material  journal  were  credited  to  raw-ma- 


BUILDING   THE   COST   SYSTEM  143 

terial  accounts,  and  debited  to  stock-in-pro- 
cess accounts.  When  the  order  cost  was 
finished,  and  goods  billed,  the  sale  price  was 
credited  to  one  of  the  eight  profit-and-loss 
accounts  and  the  cost  of  the  order  credited 
to  work-in-process  accounts  and  debited  to 
its  profit-and-loss  account. 

Now  this  looks  formidable  and  technical, 
except  to  the  accountant;  but  note  the  net 
result,  which  any  executive  would  be  glad  to 
obtain,  even  at  the  expense  of  a  little  worry 
to  some  one  else.  Every  month  there  were 
produced  (1)  figures  showing  the  value  of 
raw  material  on  hand,  (2)  the  amount  of 
money  tied  up  in  various  classes  of  work  in 
process,  (3)  the  profit  or  loss  on  eight  classes 
of  goods  shipped  during  the  month.  And 
all  this  information  was  only  about  ten  days 
old  at  the  latest.  The  executive,  and  not 
merely  the  bookkeeper,  mastered  every  de- 
tail of  the  development  of  the  scheme. 

There  was  then  the  third  problem  of  ac- 
curacy to  settle.  In  the  matter  of  labor  this 
was  easily  settled,  because,  as  shown,  the 
payroll,  a  certified  amount,  analyzed  and 
proven,  was  used.  The  expense  used  was 
the  analysis  of  the  total  monthly  amount 
from  the  books.  The  material  was  operated 


144  EXPERIENCES   IN   EFFICIENCY 

as  explained,  to  leave  figures  showing  in  dif- 
ferent classes  what  remained  on  hand,  and 
only  actual  inventory  could  show  the  accu- 
racy of  these  figures.  But  five  years'  experi- 
ence has  worked  these  down  to  the  point 
where  actual  inventory  always  comes  within 
a  fraction  of  one  per  cent  of  the  book  in- 
ventory. 

Then,  of  course,  came  the  main  test,  viz.— 
the  answer  to  the  question  as  to  the  value  of 
all  this  work.  And  in  this  case  the  activity  of 
the  executive  made  the  results  very  real. 
From  the  order  costs  came  the  first  results, 
for  they  showed  many  things  astonishing, 
as  they  always  do.  It  was  immediately  ap- 
parent that  many  orders  were  being  filled  at 
little  or  no  profit.  This  was  particularly  ap- 
parent as  to  repairs  made,  and  on  all  work 
done  away  from  the  plant,  and  an  immediate 
increased  charge  per  hour  for  men  so  em- 
ployed took  place. 

These  order  costs  likewise  showed  that, 
while  many  orders  undertaken  were  espe- 
cially profitable,  many  were  not.  Where 
prices  were  strictly  competitive  this  could 
not  always  be  remedied,  but  assuming  the 
new  proven  elements  of  cost  in  the  estimates 
many  future  orders  were  obtained  at  better 


BUILDING  THE   COST   SYSTEM  145 

prices,  and  the  introduction  of  incentives  to 
labor  in  the  cases  of  certain  regularly  made 
staple  articles,  on  which  loss  was  being  made, 
so  reduced  the  cost  as  to  bring  them  on  the 
right  side.  In  the  cases  of  special  or  patented 
machinery  no  hesitation  was  had  in  raising 
these  prices  on  the  basis  of  fair  cost.  Thus 
the  order  cost  alone  brought,  in  six  months, 
more  value  than  the  system  cost. 

But  the  comparative  detail  of  expense 
soon  brought  about  changes  that  made  future 
saving.  The  saving  in  the  tool  bill  alone 
was  very  large,  because  as  soon  as  the  execu- 
tive saw,  several  months  running,  the  amount 
of  money  spent  on  tools,  and  the  time  notes 
began  to  show  time  wasted  in  waiting  for 
tools  and  in  sharpening  them,  a  reform  in 
the  tool  system  made  a  very  respectable 
economy.  And  there  were  many  like  econo- 
mies through  this  expense  analysis. 

The  regular  system  of  time  notes  also 
made  an  entirely  noticeable  saving  in  time 
occupied  in  most  operations,  for  most  of  the 
operatives  worked  on  the  day-work  basis, 
and  the  moral  effect  of  the  knowledge  of  the 
operative  cost  was  great. 

In  fact,  as  is  both  theoretically  and  prac- 


146  EXPERIENCES   IN   EFFICIENCY 

tically  always  the  case,  the  men,  honest  be- 
fore, if  you  please,  soon  realized  (as  the 
foreman  was  called  to  the  front  to  explain, 
and  passed  the  word  along  upon  his  crest- 
fallen return)  that  "the  boss  was  wise". 
And  they  acted  upon  the  boss's  wisdom. 
They  began  to  "make  the  cost".  In  fact, 
savings  took  place  all  along  the  line  in  logi- 
cal ways  brought  about  by  constant  knowl- 
edge. 

The  saving  of  material,  based  on  the  fact 
that  all  material  used  had  to  be  accounted 
for,  was  well  worth  while. 

There  was  finally  the  satisfaction  of  the 
executive  in  his  monthly  showing  of  the  profit 
and  loss.  This  had  the  very  definite  value  of 
casting  up  the  whole  situation  as  an  assur- 
ance as  to  the  general  result,  which,  of 
course,  flowed  from  the  average  of  the  de- 
tails, and  gave  a  secure  feeling  which  tended 
much  to  give  energy  and  direction  to  the 
mind  of  the  executive.  It  did  more  indeed, 
since  the  showing  of  the  eight  classes  made 
it  clear  in  what  general  direction  an  increase 
of  the  business  should  veer,  and  efforts  made 
in  pushing  it  in  those  directions  were  effec- 
tive. 


BUILDING  THE   COST   SYSTEM  147 

And  so  after  eight  months  of  work,  the 
most  finished  of  cost  systems  was  installed 
and  began  its  work  of  economy.  Met  by  the 
ordinary  opposition  of  the  individual  and 
collective  human  natures,  it  was  fought 
through  to  such  a  quick  and  successful  finish 
by  almost  the  only  means  that  can  accom- 
plish such  a  result — the  constant  insistence, 
interest,  and  co-operation  of  the  executive. 
When  the  system  was  finished  he  understood 
it,  because  he  had  helped  to  build  it. 

And  it  saved  money  because  he  used  it. 
It  actually  increased  the  average  per  cent  of 
profit. 

And  a  year  later  he  offered  to  pay  one- 
half  the  cost  of  an  expert  if  three  of  his  com- 
petitors would  install  a  similar  system  be- 
cause, he  said,  their  "fool  competition  al- 
most compelled  him  to  take  some  orders  at 
a  loss,  which  he  hadn't  minded  doing  when 
he  didn't  know  it,  but  hated  to  do  now  that 
he  did  know  it".  And,  after  all,  does  not 
that  characterize  the  value  of  a  cost  system? 


CHAPTER   X 
THE   NECESSITY   OF   EFFICIENCY-WILL 

'HpHE  profession  of  efficiency  engineering, 
while  not  yet  entered  largely  through 
a  definite  course  of  education  and  training 
looking  towards  its  practice,  but  rather 
manned  by  practical  men  (and  perhaps 
drawing  a  little  too  largely  from  one  branch, 
accountancy),  is  nevertheless  becoming  more 
and  more  fundamentally  established  in  the 
United  States  as  of  real  service  to  progres- 
sive business  interests. 

The  efficiency  engineer,  under  whatever 
title  he  may  offer  his  services  (and  there  are 
as  many  different  styles  used  as  there  are 
phases  of  this  large  subject)  is  being  con- 
sulted and  respected  for  his  attainments,  and 
his  profession  is  becoming  recognized  as  a 
distinct  and  worthy  branch  of  engineering 
science.  If  occasionally  someone  has  entered 
upon  its  practice  without  the  necessary  expe- 
rience and  standards,  or  (what  is  frequently 
146 


EFFICIENCY   WILL  149 

fully  as  important)  without  the  right  tem- 
perament or  personality,  he  will  perhaps  not 
be  able  to  accomplish  any  great  or  perma- 
nent harm,  or  place  his  profession  in  any 
worse  position  than  the  other  professions 
find  themselves  in  through  their  least  able 
members.  And  it  must  be  remembered  that 
the  profession  is  still  young  and  in  a  state 
of  development. 

It  is  true  also,  and  not  unnatural,  that  the 
attitude  of  the  executive  towards  this  profes- 
sion is  likewise  in  a  formative  state,  and  is 
full  of  a  doubt,  hesitation,  and  suspicion 
which  has  to  be  met. 

An  early  argument  of  the  efficiency  engi- 
neer was  that  he  stood  in  the  same  relation 
to  a  business  as  a  doctor  to  his  patient,  or  a 
lawyer  to  his  client.  This  the  executive  has 
as  yet  been  unwilling  to  admit.  He  recog- 
nizes his  ignorance  of  his  body  despite  his 
intimate  association  with  it,  and  has  long  ago 
realized  that  the  intricacies  and  technicalities 
of  the  law  are  to  be  handled  only  by  an  ex- 
pert. But  his  business!  Why,  that's  the 
thing  he's  expert  in  himself!  He  spends  his 
time,  thought,  and  energy  in  its  details.  He 
has  been  a  part  of  it  or  made  its  develop- 
ment. And  if  he  has  made  it  successful,  it  is 


150  EXPERIENCES  IN   EFFICIENCY 

entirely  natural  that  he  should  doubt  the 
ability  of  an  outsider,  not  intimate  even  with 
its  nature,  much  less  its  details,  to  improve 
it.  And  this  is  not  an  unnatural  view.  More- 
over, he  generally  is  most  ready  to  give  ear 
to  the  efficiency  engineer  when  he  is  feeling 
best,  financially,  and  not  when  he  is  sick  or 
in  trouble. 

There  is,  however,  a  basic  and  proper 
viewpoint  of  business  which  offers  the  execu- 
tive and  the  efficiency  engineer  common 
ground.  Business  could  never  have  become 
so  successful,  so  widespread,  so  far-reaching, 
if  its  practice  were  not  based  on  certain 
principles  of  action ;  or,  if  it  depended  solely 
on  certain  peculiar  individual  abilities,  and 
not  on  definite  methods  and  formations  gen- 
eral and  applicable  in  all.  Individual  abili- 
ties, it  is  true,  have  made  for  greater  suc- 
cesses, but  only  as  they  have  guided  and 
animated  or  energized  the  general  plan  of 
operation. 

Every  business,  then,  has  at  least  two  gen- 
eral divisions.  One  division  deals  with  the 
particular  article  or  articles  of  manufacture, 
the  machinery  of  its  processes,  its  grade  and 
quality,  and  those  elements  which  pertain  to 
its  peculiarities.  But  another  division  deals 


EFFICIENCY   WILL  151 

with  methods  and  practices  which  in  princi- 
ple are  necessary  and  common  to  all  busi- 
nesses, i.  e.,  organization,  planning,  routing, 
storekeeping,  costs,  waste  saving,  incentives 
to  labor,  etc. 

Out  of  this  common  necessity  there  has 
logically  grown  the  fact  that  there  have  been 
different  developments  along  the  line  of  this 
second  division,  and  similar  developments  of 
varying  degrees.  Here  and  there  analysis 
and  experiment  are  still  developing  funda- 
mental theories  and  improvements  in  prac- 
tice of  economic  value  in  some  businesses, 
which  are  of  value  to  all.  The  busy  execu- 
tive, tied  down  with  the  daily  detail  of  his 
own  business,  and  struggling  with  the  diffi- 
culties of  his  own  peculiar  production  and 
problems,  cannot  know  of  these  develop- 
ments; or  knowing  generally,  cannot  put 
them  into  detailed  practice. 

The  efficiency  engineer,  on  the  other  hand, 
studying  and  developing  theory  in  relation 
to  this  second  division,  but  particularly  ex- 
perimenting and  experiencing  in  plant  after 
plant,  becomes  acquainted  with  these  meth- 
ods and  their  necessary  detail,  developed 
with  successful  practice.  He  is,  therefore, 
easily  able  to  offer  valuable  advice  in  almost 


152  EXPERIENCES   IN   EFFICIENCY 

any  business  along  the  lines  of  his  experi- 
ence. If  he  possesses  tact,  patience,  per- 
sonality, and  particularly  common  sense,  in 
addition  to  experience,  he  is  almost  invari- 
ably able  to  be  of  large  service  in  at  least 
some  of  the  elements  of  this  second  division. 
Efficiency  introduction  thus  becomes  a  nat- 
ural branch  of  engineering.  The  broad- 
minded  executive  has  seen  this  to  his  ad- 
vantage. 

But  both  before,  and  for  some  period  af- 
ter, an  executive  has  made  up  his  mind  to 
submit  his  methods  to  the  scrutiny,  advice, 
and  eventual  reorganization  at  the  hands  of 
the  efficiency  engineer,  he  retains  in  his  mind 
a  large  question  mark  as  to  the  outcome  of 
his  determination  to  invest  in  such  services. 
It  may,  therefore,  be  not  uninteresting  to 
some  to  hear  of  experiences  through  which 
others  have  gone,  and  the  net  general  result, 
and  there  are  in  mind  three  establishments, 
all  metal-working,  which  illustrate  fairly 
well  the  possibilities,  difficulties,  and  necessi- 
ties of  a  successful  relation  between  an  effi- 
ciency engineer  and  his  clients. 

The  situation  in  the  first  concern  was  one 
nearly  always  unfortunate  as  to  organiza- 
tion. The  president  was  the  chief  stock- 


EFFICIENCY  WILL  153 

holder  by  inheritance,  and  so  maintained  his 
position  on  this  account,  and  not  through 
any  special  ability  to  fill  it.  The  authority 
under  him  was  divided  between  three  or  four 
who  had  some  ability,  but  not  enough  to  dom- 
inate the  situation,  or  to  push  to  successful 
conclusion  any  plan,  which,  by  apparent  radi- 
calism or  expense  of  operation,  might  meet 
with  the  criticism  or  opposition  of  the  presi- 
dent. Too  often  the  weak  executive  gathers 
weak  men  about  him. 

The  profits  of  the  company,  while  real, 
were  not  of  such  a  volume  as  to  encourage 
this  management  to  risk  any  appreciable 
sum  in  making  any  changes  or  additions  to 
organization  or  methods  that  seemed  desir- 
able. There  was  a  general  feeling  that  effi- 
ciency was  some  plan  whereby  with  little  ex- 
penditure or  outlay  of  money,  other  than 
the  fee  of  the  engineer,  marked  improvement 
in  profits  must  follow.  This  idea  had  been 
gained  because  of  some  work  in  a  neighbor- 
ing plant,  where  conditions  were  entirely 
different,  being  simple,  and  under  the  con- 
trol of  an  able,  industrious  executive. 

Now  this  situation  contained  one  great 
weakness  from  the  point  of  view  of  perma- 
nent results.  Efficiency  is  first  of  all,  or 


154  EXPERIENCES  IN   EFFICIENCY 

needs  first  of  all  for  successful  operation,  a 
certain  state  of  mind.  This  state  of  mind 
involves  first  the  belief  that  efficiency,  beyond 
that  already  attained,  is  certainly  possible, 
attainable,  and  vitally  valuable;  second,  the 
understanding  that  efficiency,  like  any  other 
result  of  value,  is  to  be  attained  and  main- 
tained by  study,  records,  organization  and 
inspection  demanding  maintenance  expense; 
and  thirdly  an  active  determination  of  the 
executive  organization  to  co-operate  enthusi- 
astically and  continually.  This  state  of 
mind  may  be  called  efficiency-will.  It  is,  of 
course,  a  part  of  the  efficiency  engineer 's  task 
to  produce  this  state  of  mind.  It  is,  however, 
difficult  to  accomplish  when  the  chief  execu- 
tive is  really  inactive  in  control  and  his  au- 
thority is  delegated  to  several  others. 

In  this  particular  plant  the  attitude  of 
the  president  was  one  of  watchful  waiting, 
of  criticism  of  any  expense  through  addi- 
tions to  the  organization,  such  as  the  cost 
clerks ;  and  because  of  a  lack  of  understand- 
ing of  the  principles  operated  upon,  it  de- 
veloped into  a  desire  to  judge  all  proceedings 
by  the  next  inventory  trial  balance.  Such 
an  attitude,  under  the  conditions,  naturally 
induced  a  similar  one  all  down  the  line. 


EFFICIENCY  WILL  155 

This  showed  itself  in  several  concrete 
ways,  which  detracted  from  the  attainable 
values.  For  instance,  the  basic  plan  of  the 
cost  method  was  developed,  and  that  which 
pertained  to  the  book-keeping  end — expense 
analysis,  payroll  division,  etc. — was  well 
handled.  But  the  necessities  for  material- 
cost  gathering — proper  store  room  and 
issue  of  material  by  requisitions — were  re- 
fused, because  of  the  cost  of  equipment.  It 
was  expected  that  reports  could  be  gathered 
while  material  was  stored  all  around  the 
plant  and  the  workman  took  it  as  needed. 
The  material  was  valuable  and  the  waste 
great.  Needless  to  say  the  reports  were  not 
credible;  and  what  was  really  most  impor- 
tant— waste  was  not  stoppable  under  such 
conditions,  to  say  nothing  of  the  resultant 
costs.  Such  a  condition  was  one  of  adher- 
ence to  form,  rather  than  to  certain  value 
of  costs. 

Another  example  was  that  of  the  use  of 
the  production  schedule.  This  schedule 
showed  clearly  the  amounts  on  hand  of  a 
great  number  of  small  parts,  orders  out  un- 
filled, and — in  connection  with  an  analysis  of 
the  use  in  periods  of  time  of  these  parts — 
offered  a  right  and  reasonable  basis  for 


156  EXPERIENCES  IN  EFFICIENCY 

planned  production.  But  sucli  a  plan  needed 
study  and  insistence.  The  man  in  charge 
of  this  found  his  work  blocked  constantly  by 
the  orders  of  a  superintendent,  who  had  been 
accustomed  rather  to  keep  his  machines  go- 
ing in  the  way  best  suited  to  their  set-up,  the 
condition  of  raw  materials,  and  his  own  judg- 
ment, and  the  lack  of  efficiency-will  in  the 
executive  organization  had  not  developed 
that  confidence  which  insists  that  the  old 
ways,  where  they  conflict,  be  set  aside  for 
the  unobstructed  operation  of  the  new. 

These  examples  illustrate,  of  course,  what 
is  actually  happening  in  a  great  many  plants 
where  efficiency  is  delayed.  In  plants  where 
the  suggestions  come  from  those  of  lesser 
authority,  it  is,  of  course,  somewhat  excusa- 
ble on  the  score  of  unripe  judgment,  if  such 
suggestions  do  not  receive  a  thorough  con- 
sideration. Where  expert  advice  is  engaged 
such  action  seems  folly,  but  is  really  due  to 
the  lack  of  efficiency-will.  The  net  result  in 
this  plant  was  that  while  the  body  of  efficient 
methods  was  gradually  built  up — cost  meth- 
ods, production  schedules  and  planning,  in- 
centives, waste  reports,  etc., — the  soul  was 
lacking.  And  efficiency  schemes  without  a 
soul  are  liable  to  develop  into  red  tape,  or  to 


EFFICIENCY   WILL  151? 

arrive  at  a  certain  low  plane  of  value,  and 
bar  further  improvement. 

In  one  department  alone,  where  there  was 
a  change  to  a  new  and  energetic  head,  did 
the  methods  really  reach  any  intelligent  en- 
ergetic development  or  use,  and  in  this  de- 
partment a  loss  was  quickly  turned  into  a 
profit  of  equal  amount. 

Here,  then,  is  a  typical  case  illustrating 
one  large  reason  why  efficiency  does  not 
travel  forward  as  rapidly  as  its  enthusiasts 
think  it  should.  Efficiency  needs  bel^f  and 
enthusiasm  behind  it.  At  its  best  it  can  at 
first  only  start  on  a  career.  Its  methods 
must  be  developed.  Except  in  its  simpler 
propositions  it  cannot  jump  at  once  into  its 
best  pace.  Doubt  and  executive  inactive 
watchfulness  do  not  foster  it.  The  first 
necessary  principle  of  efficiency  must  be  co- 
operation. "What  the  executives  do  not 
stand  behind,  the  operators  stand  in  front 
of"  is  a  rule  that  follows  infallibly  from  the 
human  nature  of  the  factory  situation,  as  it 
follows  in  an  army  with  a  poor  general,  or 
a  baseball  team  with  a  poor  manager. 

The  methods  applied,  conforming  of  course 
to  conditions,  were  precisely  such  as  had 
proved  much  more  successful  in  other  plants, 


158  EXPERIENCES  IN   EFFICIENCY 

but  they  failed  in  this  plant,  except  in  cer- 
tain spots,  to  possess  more  than  a  form. 
Their  development  was  stunted  by  lack  of 
efficiency-will.  The  executive  organization 
were  not  opposed  to  the  suggestions  made, 
they  were  simply  not  enthusiastically  for 
them. 

The  second  case  was  a  very  happy  one  both 
in  operation  and  results.  The  executive  and 
selling  authority  was  divided  between  two 
men  who  owned  majority  stock  control,  and 
who  had  built  the  plant  up  from  a  small  but 
practical  foundation.  They  could  never  have 
been  persuaded  to  invest  a  sum  of  money 
in  any  plan  of  efficiency,  because  they  had 
worked  in  all  parts  of  the  plant  themselves 
and  their  training  and  familiarity  with  the 
details,  together  with  the  condition  of  their 
finances,  were  not  conducive  to  any  expendi- 
tures along  broad  lines  of  action.  They  were 
persuaded  into  the  adventure,  however,  by 
one  to  whom  they  owed  some  money. 

Once  they  had  committed  themselves, 
nevertheless,  being  practical  men  and  want- 
ing to  get  the  value  of  their  money,  they  en- 
tered into  the  proposition  enthusiastically. 
It  was  a  little  difficult  for  them  to  grasp  with 
complete  understanding  and  foresight  all  the 


EFFICIENCY   WILL  159 

theories  enunciated;  but  as  the  work  began 
to  develop,  and  they  saw  some  practical  re- 
sults, they  arrived  completely  at  the  proper 
state  of  mind.  They  developed  efficiency- 
will  and  talked  all  of  their  organization 
into  it* 

The  first  work  put  into  complete  operation 
was  the  cost  system.  Long  arguments  as  to 
the  proper  theory  of  costs  ensued. 

Certain  theories  of  cost — very  simple  and 
easy  of  operation,  involving  an  addition  of 
material  and  labor  costs,  and  multiplying 
them  by  a  fixed  figure — were  held  by  one 
partner.  Any  scheme  which  demanded  the 
following  of  an  article  through  its  opera- 
tions, wherethrough  it  took  its  accretions 
of  labor  and  expense  as  it  went  along,  looked 
needless.  The  other  partner  took  the  atti- 
tude that  if  the  manufacture  of  an  article 
in  their  line  was  demanded  of  them,  the 
method  of  such  manufacture  was  left  to  them 
as  experts,  and  the  efficiency  engineer  should 
have  the  same  chance.  He  was  given  a  free 
hand  and  results  were  awaited. 

But  the  plant  was  one  where  everything 
went  through  in  definite  lots  of  shippable 
articles,  so  that  by  the  introduction  of  lot 
costs  it  became  possible  to  balance  up  every 


160  EXPERIENCES   IN   EFFICIENCY 

month  and  show  profit  or  loss  for  the  whole 
production,  in  addition  to  obtaining  the  de- 
tail costs  with  profit  or  loss  on  each  lot  of 
articles  finished.  And  when  these  figures, 
hitched  up  to  an  estimating  system  for  bid- 
ding in  new  work,  began  to  operate  well, 
and  produce  tangible  results  and  increased 
profits,  no  suggestion  was  deemed  impossi- 
ble of  accomplishment.  This  plant,  indeed, 
bore  out  very  well  the  belief  that  a  right  cost 
system  is  the  proper  basis  for  all  improve- 
ment, since  it  offers  visible  and  indisputable 
evidence  (through  its  pictures  of  profit  and 
losses)  of  efficiency  and  lack,  of  opportuni- 
ties of  improvement.  Care  of  materials,  in- 
centive methods,  waste  reports,  expense  con- 
sideration, planning  of  work,  all  followed 
quickly  with  the  minimum  difficulty. 

A  typical  case  of  efficiency-will  was  shown 
in  the  progress  of  the  work.  One  depart- 
ment handled  an  operation  requiring  very 
skillful  and  highly-paid  hand-work.  This 
work  was  paid  on  the  hour  plan,  but  it  was 
thought  that  a  bonus  plan  would  produce 
definite  economies.  The  operatives  were  dif- 
ficult to  obtain,  and  consequently  very  in- 
dependent. They  had  no  enthusiasm  for  any 
change,  and  frankly  stated  so.  In  very  many 


EFFICIENCY   WILL  161 

cases  the  matter  would  have  dropped  here; 
not  in  this  case,  however.  The  partners  got 
the  men  together  and  told  them  plainly  that 
the  scheme  was  going  to  be  put  into  opera- 
tion; that  it  would  undoubtedly  work  to  the 
benefit  of  both  the  company  and  the  men 
who  tried  it  earnestly;  and  that  others  were 
invited  to  quit,  a  guarantee  of  certain  re- 
sults for  a  given  period  being  made,  how- 
ever, for  those  who  stayed.  The  scheme  pro- 
posed proved  advantageous  after  a  short 
trial  to  all  concerned,  but  illustrated  very 
well  one  of  those  occasions  where  lack  of 
the  proper  spirit  and  efficiency-will  would 
have  prevented  a  material  gain. 

And  after  three  years  the  whole  scheme, 
under  their  insistence,  has  remained  so  close- 
ly in  operation  that  an  examination  by  an- 
other firm  of  efficiency  engineers  brought  out 
the  comment  that  this  concern  had  one  of 
the  simplest  and  most  effective  and  up-to- 
the-minute  systems  they  had  seen.  The  re- 
sult is  amply  observed  in  the  profits. 

Thus  hearty  and  quick  co-operation  in  this 
plant  and  a  determination  to  hold  to  and 
develop  all  suggested  improvements,  made 
efficiency  a  simple  and  valuable  proposition, 
despite  the  fact  that  the  executives  had  pre- 


162  EXPERIENCES   IN   EFFICIENCY 

viously  developed  no  great  reputation  as 
business  men. 

The  third  example  developed  still  a  dif- 
ferent eventual  result.  This  plant,  manufac- 
turing a  specialty,  was  quite  successful  finan- 
cially. The  president  had  originated,  and 
made  successful  by  shrewdness,  his  venture. 
But  he  had  reached  quite  an  old  age,  and 
his  infirmities  prevented  him  from  taking  a 
very  active  part  in  its  management.  The 
authority  of  management  was  divided  be- 
tween the  superintendent  in  the  factory  and 
an  officer  who  had  charge  of  the  office  and 
the  selling.  It  was  this  latter  who  desired 
more  efficient  methods  in  the  factory. 

There  of  course  is  something  very  human 
about  such  a  situation,  where  the  head  of  one 
section  desires  to  see  some  other  section  im- 
proved. This  is  a  situation  arising  very 
often.  It  is  usually  unfortunate  only  when 
conditions  are  such  that  there  is  not  some 
bond  of  broad  spirit  of  loyalty  to  the  plant, 
or  an  over-executive  who  is  able  to  control. 
This  was  one  of  the  unfortunate  situations. 

The  superintendent  had  developed  some 
methods  of  system  gathered  from  his  ex- 
perience and  reading,  and  was  frankly  much 
opposed  to  the  service  of  any  outsider.  This 


EFFICIENCY    WILL  163 

situation  had  in  it  what  not  unusually  ex- 
ists in  the  majority  of  cases  where  efficiency 
is  introduced,  namely,  one  man  in  an  im- 
portant position  who  was  unfavorable  to  any 
method  other  than  his  own.  It  lacked  what 
saves  many  such  situations,  viz.,  an  execu- 
tive above  him  who  eventually  would  make 
it  clear  to  him  that  his  co-operation  was  ex- 
pected. There  were  really  two  somewhat 
antagonistic  and  independent  authorities. 

The  superintendent,  firm  in  the  conviction 
that  his  own  methods  were  adequate,  (and 
perhaps,  as  is  not  unnatural,  and  indeed  is 
unfortunately  a  large  cause  of  the  stoppage 
of  the  progress  of  efficiency,  fearful  that 
methods  introduced  by  others  would  be  to 
his  detriment),  could  not,  and  did  not  op- 
pose any  plan  offered  openly.  But  he  took 
the  practical  position  that  since  the  work 
was  proceeding  without  his  consent,  it  did 
not  entail  any  necessity  of  assistance  from 
him,  and  he  took  many  opportunities  to  cre- 
ate a  spirit  against  it,  the  effect  of  which 
was  that  those  engaged  in  the  work  as  em- 
ployees of  the  plant  felt  that  their  jobs  were 
not  permanent,  and  themselves  possibly  a 
little  ostracized.  Such  a  spirit,  of  course, 


164  EXPERIENCES   IN    EFFICIENCY 

held  nothing  encouraging  to  quick  and  valu- 
able results. 

The  work  was  proceeded  with  under  the 
quiet  opposition  of  the  superintendent,  how- 
ever, and  certain  methods  which  led  to  the 
office,  and  could  be  watched  from  there,  were 
introduced  and  gotten  into  good  working  or- 
der. First  class  store  rooms  with  card-rec- 
ords of  the  income,  outgo,  and  amount  on 
hand  of  parts  in  progress,  and  of  finished 
parts,  were  built  and  put  into  operation. 
Lot-routing  systems  were  introduced.  Bec- 
ords  of  waste  and  spoiled  parts,  and  by  whom 
spoiled,  were  introduced.  And  finally  a  lot- 
cost  system  on  all  parts  and  finished  as- 
sembled articles  was  established,  as  was  a 
production  system.  These  were  of  course 
valuable  and  fundamental  and  they  were  tied 
together  by  reports  and  records  to  the  of- 
fice. Under  the  conditions  this  was  all  that 
could  be  accomplished.  But  much  can  be 
done  with  such  basic  methods. 

As  a  matter  of  fact,  what  happened  in  this 
case  was  that  after  two  years  a  change  came 
about.  A  new  element  in  the  form  of  a  gen- 
eral manager  was  introduced,  and  the  funda- 
mental methods  having  been  maintained,  ef- 
ficiency began  anew  with  this  as  a  base,  and 


EFFICIENCY   WILL  165 

the  work  introduced  without  co-operation 
began  to  bring  forth  its  true  value. 

These  experiences,  unexciting  and  ordi- 
nary but  humanly  natural,  serve  to  illustrate 
nevertheless  some  important  necessary  con- 
ditions for  success  in  efficiency  attainment, 
not  always  fully  comprehended  nor  operated 
upon  either  by  the  engineer  or  by  the  execu- 
tive who  desires  efficiency  in  his  plant. 

They  indicate  clearly  the  fact  that  efficiency 
needs,  as  a  fundamental  to  build  upon,  a 
proper  state  of  mind  in  the  executive  organi- 
zation not  improperly  termable  "efficiency- 
will."  This  state  of  mind,  or  efficiency-will, 
involves  (if  perhaps  not  at  first,  yet  finally) 
a  strong  belief  in  the  existence  of  a  higher 
efficiency  and  its  attainability  under  makable 
conditions.  Following  an  understanding  of 
the  principles  of  operation  and  perhaps  some 
slight  attainment,  there  must  ensue  ener- 
getic enthusiasm.  For  it  must  be  realized 
that  after  all  most  efficiency  results  are  to 
be  gained  through  human  effort  all  the  way 
down  the  line  of  employees,  and  enthusiasm 
is  a  tremendous  energizer. 

And  it  is  no  more  true  of  a  metal  bar  that 
a  constant  heat  at  one  end  will  gradually  be 
felt  at  the  other  end,  or  that  an  icy  bath  at 


166  EXPERIENCES   IN   EFFICIENCY 

one  end  will  transmit  coldness  throughout 
the  bar,  than  that  enthusiasm  or  indifference 
will  likewise  be  transmitted  from  the  ex- 
ecutive organization  down.  Too  many  ex- 
ecutives think  of  efficiency  introduction  as 
parallel  to  the  case  of  a  wire  connection  to 
an  electric  current  when  the  current  flashes 
immediately  through  the  whole.  Too  often 
the  bar  simile  (and the  simile  of  a  long  bar  at 
that)  holds  more  nearly  true. 

But  it  must  not  be  forgotten,  also,  in  con- 
sidering the  efficiency-will,  that  knowledge 
and  enthusiasm  must  be  transmitted  down- 
ward through  a  lure  as  well  as  a  drive.  Ef- 
ficiency attainment  is  essentially  a  mutual 
affair.  The  advantage  gained  must  be  shared 
between  employer  and  employee  on  a  fair 
basis. 

Efficiency  attainment  involves,  then,  co- 
operation of  the  executive  organization.  All 
must  work  together  with  one  purpose.  This 
natural  law  of  any  operation  involving  the 
working  together  toward  one  end  of  many 
people  is  indeed  all  the  more  essential  in 
efficiency  attainment,  because  of  the  fact  that 
it  means  extraordinary  results  striven  for, 
and  involves  the  uprooting  and  eradication 
on  the  part  of  many,  who  are  past  that  time 


EFFICIENCY  WILL  167 

of  life  when  it  is  easy  and  natural  to  change, 
of  old  habits,  customs,  methods,  and  man- 
ners. 

The  executive  who  desires  results  should 
understand  and  endeavor  to  bring  about  this 
efficiency-will  and  co-operation,  and  not  de- 
pend entirely  on  the  engineer  to  accomplish 
it.  The  cases  cited  illustrate  results  obtain- 
able by  its  lack  and  its  presence  suggesting 
an  underlying  feature  of  the  psychology  of 
the  situation. 

The  operation  of  this  psychology  is  so 
plain  in  the  ordinary  every  day  affairs  of 
business,  that  its  necessity  in  practical  ac- 
tion when  the  attainment  of  extraordinary 
results  is  attempted  it  seems  might  be  taken 
for  granted,  and  striven  for  or  forced  by  any 
interested  executive.  It  is  unfortunate,  how- 
ever, that  too  often  efficiency  attainment  is 
looked  upon  wholly  as  experimental. 

Efficiency  progress  will  however  undoubt- 
edly make  stronger  and  more  rapid  advances 
in  the  right  direction  when  the  executive  has 
learned  to  develop  in  advance,  or  at  least  co- 
incidentally  with  the  attempt  at  efficiency 
increase,  a  strong  efficiency-will. 


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